C-7/87

3. In the following analysis I shall first 6. In order to ensure equivalent purchasing outline the legal background to this action, power, Article 64 provides that officials' remuneration is to be weighted at a rate * Translated from the Portuguese. above, below or equal to 100%, depending 1 — OJ L336, 29.11.1986, p. 1. 2 — Case 194/86 Rydalm vCommission; Case 327/86 Herkenrat and Others v Commission; Case 328/86 Brazzelli and Others; Case 163/87 Nowak v Commission; Case 295/87 Bertelo and Others v Commission; Case 300/87 Baum- 3 — See judgment of 15 December 1982 in Case 158/79 gaertner and Others v Commission; Joined Cases 312 to Roumengous and Others [1982] ECR 4379, paragraph 9; see 317/87 Nonon, Andreason, Binns, Swinnock, Price, Kingston also the judgment of 15 January 1985 in Joined Cases 532, and Others v Commission, Parliament, Court of Justice and 534, 543, 567, 600, 618, and 660/79 /an Arnesi and Others Court of Auditors; Joined Cases 332 and 336/87 Da Po, [1985] ECR 55; Sec also Case 737/79 Dino Battaglia Actis-Dato and Others v Commission. [1985] ECR 71.

COMMISSION v COUNCIL

on living conditions in the various places of which are to be taken into account in the employment. The weightings are determined annual adjustments. by the Council, on a proposal from the Commission, and the weighting for officials employed in Belgium and Luxembourg is to be 100%. 11. In addition, the principle of periodical reviews of the weightings was adopted in 1976, to determine whether they correctly reflect the equivalence of purchasing power 7. The weightings for the other countries of remuneration in the various places of are reviewed and adjusted periodically employment. according to changes in the cost of living in the various Member States.

5 — It is true that the preamble to the 1981 Decision only 10. Also, in the event of substantial changes mentions Article 65 and that Point II. 1. of the decision is preceded by a reference to 'Annual review of remuneration in the cost of living, intermediate (Article 65 (1) of the Staff Regulations)'. However, adjustments are to be made (Article 65 (2)), although falling outside the scope of the annual review, Point II. 1.1 governs the five-yearly verification of weightings and the first paragraph thereof refers to Article 4 — OJ L 386, 31.12.1981, p. 6. 64 of the Staff Regulations.

OPINION OF MR VILAÇA —CASE 7/87

COMMISSION v COUNCIL

in living conditions disclosed by the peri­ to the Commission's proposals. The changes odical review. were in two areas: firstly, the method used for calculating the accommodation item was not that used for the Commission's most recent proposal but the method used for the previous one, based on national average 23. On the basis of that opinion the house rents obtained from national Working Party on Staff Regulations accounting data; secondly, the date on reached the conclusion (at its meeting of 19 which the review was to take effect was November 1984) that the introduction of a fixed as 1 July 1986 and not 1 January threshold was unacceptable. 1981.

24. The Commission accepted that view, withdrew its proposal and endeavoured to 27. In numerical terms, the difference find more reliable data in respect of accom­ between the Commission's proposal and the modation which would obviate the need for Council regulation regarding adjustment of the proposed threshold. the weightings is as follows:

29. The Commission maintains that in the two areas in which the regulation adopted departed from its proposal, it infringed both 32. According to the Commission, the Article 64 of the Staff Regulations and the application of the method adopted in 1981 1981 Council Decision. On the one hand, in requires reference to capital cities since the the Commission's view the values used in purpose of the five-yearly review is to calculating the accommodation item as part ensure that the geographical weightings are of the cost of living do not reflect the real correctly determined: those weightings were costs involved, and they do not enable the established with effect from 1968 and 1969 levels of remuneration required to ensure by reference to prices in capital cities, and the equivalence of officials' purchasing were only determined for Ispra following power to be determined with sufficient the judgments of the Court of 15 December precision; on the other hand, the 1982 (which is why Ispra was included in Commission also considers that the five- the Commission's proposal). In those yearly review of the weightings should take circumstances, the Council regulation had effect as from the end of the previous to take account of the situation in the period. capital cities and obviously it could not do so by using overall averages obtained from the national accounts.

COMMISSION v COUNCIL

the second proposal) no objective factor had recognition of that fact by publication in the emerged to justify a change in the method Official Journal constituted the quid pro quo used. Secondly, the Commission had never secured by officials in return for the impo­ submitted to it a proposal based on average sition of the 'crisis levy’. rents in the capital cities, which would have made it possible to achieve more accurate results without changing the method, but 39. For its part, the Council ultimately had chosen to change the method by conceded, in its rejoinder, that it did not recourse to a survey based on information challenge the principle of surveys in the from estate agencies. As regards the set of capital cities but objected to the approach exceptional measures, the Council observes followed in carrying them out, which it that the 'crisis lev / is not taken into considered inappropriate; in particular, it account in relation to the other elements of considered that the surface area of typical the annual review and still less for the accommodation was not equivalent in all purposes of the five-yearly reviews. the capital cities and that in certain capitals European officials resided further from the centre or in smaller houses, for which 35. In its reply, the Commission draws reason the proper course would have been attention to a number of points. to approach them for the purposes of the survey.

OPINION OF MR VILAÇA — CASE 7/87

44. It is true that there are officials who 49. The provisions adopted by the Council work in the capitals but live outside them fixing the ways and means of adjusting the and indeed there are others whose duties weightings, as provided for in the Staff are performed elsewhere than in the capitals Regulations, may not disregard those prin­ (as in the case of Ispra). ciples and objectives.

45. For that reason, the third paragraph of 50. That is the essential background against Point II. 1.1 of the Annex to the 1981 which must be interpreted the 1981 Decision provides that where objective Decision, by which the Council bound itself factors suggest that there is a danger of regarding the basis for regulating the considerable distortion in relation to the exercise of the discretionary power data recorded in the capital a check will be conferred on it by the Staff Regulations. 8

carried out for other places of employment.

51. In those circumstances it must be 46. That check, which is necessary — as recognized that recourse to national made clear in the two judgments of 15 averages as a means of determining the December 1982 — to establish weightings factors on which is to depend the equiv­ different from those applied in the capital alence of officials' purchasing power at their cities, must also give rise, where appro­ various places of employment does not priate, to a review of the weightings, in enable the prescribed objectives to be particular the five-yearly review. achieved, in so far as a distorted view of the actual position is given as a result of the calculation methods used.

55. When presenting the first proposal, the Commission acknowledged the difficulties 59. The text of Article 64, taken in inherent in the method adopted to calculate isolation, does not appear to require the accommodation component of the cost account to be taken of the specific living of living and therefore proposed the intro­ conditions of officials or of their typical duction of a threshold to trigger consumer habits in order to establish the adjustments. Clarification is provided in that weightings for their remuneration. connection by the explanatory memo­ randum of 24 March 1986 relating to the proposal of 23 December 1985, which refers to the serious defects of the method. 60. That provision merely refers to the application of different weightings 'depending on living conditions in the various places of employment'. 56. Similarly, the rejection of that proposal by the Council Working Party on Staff Regulations was based on an opinion from its legal department, to the effect that it was 61. That does not seem necessarily to 'clear that the method employed cannot be indicate that it is illegal to use average regarded as entirely reliable, in view of the values for the rents paid by the population margin of error for which the Commission as a whole in the various places where seeks to allow by introducing a threshold'. officials live, in capital cities in particular.

64. In order to attain that objective, it does not seem inappropriate to take account of the expenses for which such remuneration is used and therefore, as nearly as possible, of 68. The Council's objection does not the ordinary consumer habits prevailing appear well founded. among European officials as a whole; against that background it thus appears justified to take account, as was done in the Commission's proposal, of the type of accommodation occupied by those officials. 69. As the Commission explained in its reply, the Fischer method provides inter­ mediate results, representing a compromise between two possible extreme choices: as I 65. In their family budgets, moreover, understand it, the range of choices extends accommodation accounts for a significant from the absolute generalization of a way of percentage (around 20 %, according to the life characteristic of a particular place to Commission) and is therefore an important consideration of all the features peculiar to factor in any comparison of purchasing 9 the way of life in each place of residence. power. In fact, for a calculation of equivalences of purchasing power to be possible, it is necessary for the cost-of-living components (in this case, housing) to be based on identical or comparable products or services, 66. It is true that, as the Commission stated, having sufficiently general characteristics to the calculation method used for determining be found in all the places being compared. the weightings was based on what is known Accordingly it must be acknowledged — as as 'the Fischer method', which presupposes a basis of comparison — that a particular that all officials are likely to have the same standard of living can be maintained in the standard of living as a result of adapting various places where officials are employed, themselves to the way of life available to and for that purpose the accommodation them in the various places of employment. must of course possess the characteristics dictated by the specific features of each region. It is on the basis of the costs determined in each region for accommo­ dation capable of providing the same kind 67. In its defence, the Council took that of comfort that purchasing power can then fact as a basis for criticizing the be compared. Commission's position, asserting that the type of accommodation occupied by 9 — At this point the Commission's submissions arc not very officials is an improper reference point for explicit and appear to have been curtailed.

70. Moreover, the terms in which the choice to the criterion of comparability; SOEC made inquiries of the national stat­ then it stated that, as already emphasised, istical departments described the type of that type of accommodation was described accommodation in question with sufficient in detail in the SOEC's survey; that after accuracy, in a manner which seems the elimination of the factors giving rise to a consonant with the objectives of the degree of uncertainty the Council could not requisite comparison of the purchasing reject the comparisons proposed by the power of remuneration at the various places Commission, except on the ground of of employment. manifest error and no such error was proved, since the criticisms made of the method are general in scope, and capable of 71. In any event — whatever the pertinence embracing any kind of sampling; and finally of the Council's criticisms regarding the that the documents submitted at successive method used by the Commission — the meetings of the Working Party on Staff national averages used as a basis for the Regulations demonstrated the reliability of contested regulation could not give a true the results obtained by the SOEC, which picture of officials' circumstances. agreed with those arrived at by total exclusion of the accommodation item or inclusion of the building costs, by contrast 1.3. Analysis of the Council's reasons for with the anomalies resulting from the use of rejecting the Commission's proposal the data obtained from national accounts (as occurred in the case of London, in respect of which the latter method gave 72. The second-from-last recital in the discrepancies of the order of 10 percentage preamble to the contested regulation states points). that 'the results of the survey do not appear to be acceptable since it failed, in particular, to deal with a truly representative sample of accommodation; . . . furthermore, the survey should have been conducted pursuant to the second paragraph of Point II. 1.1 of the 74. In support of its allegation that the Annex to Decision 81/1061 /Euratom, sample was unrepresentative, the Council ECSC, EEC, in agreement with the national first stated that, by contrast with the statistical departments'. position in other capitals, the cost of accom­ modation in Brussels and Luxembourg was determined by reference to the rents 1.3.1. The unrepresentative nature of the actually paid by the officials employed sample there.

76. As regards the consistency of the results 79. In the second place, as explained by the obtained by the various methods of dealing Commission and confirmed by the letters with the accommodation item, 11 the sent by the SOEC to the national authorities Council, although conceding that, for the containing the terms of the survey to be United Kingdom, Ireland and Italy, those based on information from estate agencies results confirm the Commission's (see annexes 1 and 2 to the Commission's arguments, contends that that does not reply to the written questions put to it by occur in the other cases. Thus, in three the Court), that survey did not necessarily Member States (Denmark, the Netherlands relate to dwellings situated in city centres and Greece) the values in the regulation are but rather to 'middle/upper-class residential close to those in the Commission proposal; areas', which may involve the peripheral in three (Germany, France and Greece) the areas just as well as areas in the centre. values in the regulation are close to those obtained without the accommodation item being included. In other words, in the Council's view, in the case of five States out 80. The Commission also states that the of eight, an analysis of the figures does not calculations made by the SOEC took confirm the Commission's allegations that account of the basis of occupation of the the results of the method adopted in the accommodation — owner-occupation or regulation are inconsistent or that the results tenancies — by using an 'owners weighting' of the method advocated by the and similarly a 'tenants weighting' and Commission are reliable. recourse to the calculation of notional rents, by allocating the same parity to lettings and to purchases, a method commonly used in calculations for the purposes of national 77. The explanations given by the accounts. Commission in its reply appear, however, sufficient to rebut most of the charges made by the Council against the method on which the Commission's proposal was based. 81. Finally, in response to the Council's comments on the consistency of the results, the Commission accuses the defendant of confusing the method of calculating the 78. In the first place, the Commission states accommodation item with the method by that, for the purposes of the five-yearly which the reliability of the results thereby review, the level of rents paid in Brussels obtained is tested. The applicant points out was also the subject of surveys centred on that it never stated that, in a given country, the values compared — prices excluding 11 — Information from agencies (Commission proposal), exclusion of the accommodation item, consideration of accommodation, prices including accommo­ building costs and accommodation costs calculated by dation (in capitals or in general) and reference to general averages based on national accounts (Council regulation). construction costs — never coincided or

82. Accordingly, when the reliability of the figures is verified the variations must be 86. The Commission's explanations seem to kept within reasonable limits, intervention me to be convincing, in so far as: being justified only if those limits are exceeded to the point of contradicting the most basic information available from ordinary experience. (a) the calculation method based on national accounts led to distorted and unreliable results. In that context, the Council's statement that the 83. According to the Commission, that is Commission had introduced the what happened when the results taken from threshold of 2.5% in order to avoid a national accounts for each country as a fall in the weightings arrived at by the whole were used. Two sets of data — prices use of that method seems to be abso­ excluding accommodation and building lutely without foundation, whereas, by price indexes — were in line with each other contrast, the Commission's statements whilst at the same time, in certain cases, as to the reliability of the method there was a significant divergence from the appear reasonable; prices including accommodation, distorting the other sets of data.

87. It must also be pointed out that the arguments put forward by the parties touch 93. In its defence, the Council went so far upon the delicate problem of the relative as to contend that neither the method nor powers of the SOEC , the Commission and the results of the survey entrusted to the the Council, a matter with which I shall SOEC by the Commission were ever deal in due course. submitted to the competent working party of statistical experts. 88. Before doing so, I shall consider the Council's second reason for rejecting the Commission's proposal. 94. That allegation is not, however, confirmed by the information before the Court, which shows that details of the 1.3.2. The absence of agreement between the survey and its results were submitted for SOEC and the national statistical departments consideration by the Working Party on Price Statistics.

COMMISSION v COUNCIL

not fail to take account of the SOEC's 103. My earlier examination has however conclusions on which that proposal was enabled me to make a number of partial based (although there was an objection judgments capable of serving as a basis for from one of the delegations to the Working the solutions which it is incumbent on me to Party on Price Statistics) and was not propose : entitled to replace the figures arrived at using an accurate method by figures which were manifestly inappropriate. (a) in the terms of Article 64 of the Staff Regulations and by virtue of previous decisions of the Court — and also of the Council's 1981 Decision, which 98. Specifically, the discussion touches once established the procedures for applying more upon the relative powers of the two that provision — compliance with the institutions and the limits of the Council's principle of equivalent purchasing power discretionary power. for the remuneration of Community officials calls for determination, with the greatest possible precision, of the cost- of-living components which specifically 99. How should this question be resolved? affect the situation of those officials in their various places of employment;

1.4. Conclusions concerning the first part of the application (b) the average overall figures for house rents obtained from the national accounts are influenced by factors which have nothing to do with the specific localities to which officials are 100. The technical nature of the problems assigned, and therefore recourse to arising in these proceedings and also a those figures does not enable an degree of opacity in the arguments important component of the cost of exchanged by the parties rendered living of Community officials to be necessary, for reasons of clarity, the determined with sufficient precision to preceding digression concerning the various ensure the equivalence of the purchasing aspects of the applicant's first submission. power of their remuneration;

nature, a better reflection of the real might seem to be a method less susceptible position than is available from average to variances. Moreover, it appears to be the rents derived from national accounts, method used for their officials by other and therefore it should not be rejected international organizations (the OECD and out of hand as inappropriate or unre­ the World Bank) which are well known for liable. the competence of their statistical departments and the accuracy of their economic surveys. 104. It will of course be said that the ideal method, the one which would enable the aims of the five-yearly review to be achieved 110. Furthermore, there is another factor in full, would have been a survey based on which would certainly have rendered it inquiries addressed to the officials them­ more difficult to make direct enquiries of selves, so that their actual accommodation officials when it became necessary to expenses could be determined. prepare a second Commission proposal: I refer to the time which had already elapsed since the end of the reference period (four 105. I doubt whether that is the case. years), as a consequence of which the results of a survey on that basis, and indeed the possibility of carrying it out, would have been more uncertain. 106. It is true that the fact that a direct survey was carried out for officials residing in Brussels, Luxembourg and Varese — where they are more 111. In any event, if that method were used numerous — would appear to indicate that it would certainly be necessary to take the the same approach would be feasible in the technical measures necessary to neutralize other capital cities. the effects of the variances to which I referred. One of the instruments which could be used to correct the data obtained from a direct survey would then, in all 107. However, the Commission explained probability, be a survey involving estate that that method would not be statistically agencies . . . meaningful, since very few officials live in those capitals and thus no sufficiently representative sample exists. 112. Admittedly, it cannot be stated with certainty that the method adopted by the 108. That argument is credible, since it Commission is wholly beyond criticism or, would be improper if the adjustment factors still less, that it is an ideal method. And, in to be applied to the weightings were heavily particular, there is no denying that it was influenced by individual decisions or situ­ challenged by United Kingdom statistical ations which — in a relatively restricted experts. environment — varied significantly from the most usual standard of officials' accommo­ dation. 113. For that reason, in this highly technical area, cooperation between the SOEC and the national statistical departments is clearly 109. Accordingly, from that point of view, essential in order to avoid stumbling blocks the recourse to 'typical accommodation' and to arrive at the most accurate answers.

117. However, as we have seen, the 123. Let me start by pointing out that, Commission has provided explanations and within the framework of the division of documents concerning the manner in which powers between the various bodies and it carried out the survey with the help of the institutions involved, it is incumbent upon national statistical departments. It does not the SOEC, whenever necessary, to provide appear that any of them refused to a technical basis on which the Commission cooperate or objected to the method is to prepare its proposals and the Council advocated, which is succinctly described in take its decisions. In an eminently scientific SOEC's letters. And it does not seem to me and technical field, its work is, of course, of that the fact that contact was established fundamental importance. with SOEC's usual correspondents in the various national departments is indicative of any irregularity in the procedure or changes 124. With respect to the determination or the nature of the action taken by them. review of weightings, the 1981 Decision is peremptory: it is for the SOEC to verify ('the SOEC shall verify ... ' ), in agreement with the statistical departments of the 118. Is it also necessary for the method to Member States, whether the ratios between be discussed with those departments in weightings accurately reflect purchasing-

OPINION OF MR VILAÇA — CASE 7/87

power equivalences (second paragraph of 130. And, as has been seen, the SOEC Point II. 1.1). It should be noted that its only collaborated directly with the national stat­ responsibility is to verify the accuracy of the istical departments. weightings, not to adjust them.

127. It must be stated that, in the case under review, it cannot be concluded without 133. It also appears from the information reservation that any of those defects are before the Court that, within the working present. party, there were objections to the results produced after the survey was carried out. However, it appears that only one national expert (from the United Kingdom) was 128. On the one hand, it must be borne in involved, and his objection related only to mind that the results of the survey based on the survey for London. data from estate agents were subjected to tests of accuracy which the Council was not able to challenge convincingly. 134. But neither with regard to this point (the position of the Working Party on Stat­ istics) nor with regard to the intervention of 129. Moreover, not only were no better the national statistical departments do the figures produced but it has also been estab­ proceedings disclose any solidly reliable lished that the methods adopted are used by information making it possible to form a other important international organizations comprehensive view of the sequence of with respect to their officials. events and to evaluate them in detail.

COMMISSION v COUNCIL

135. It must also be said that, in view of the requisite further steps, to make the consultative nature of the functions of the adjustments needed to secure unanimous Working Party on Price Statistics, an approval. objection by one of its members ought not to be able to obstruct the decision-making process of the SOEC and the Commission, 140. In view of all the foregoing, it must unless there are specific circumstances inevitably be concluded that, on the basis of which, if not taken into account, would lead the applicant's first submission, the to an obviously incorrect result. contested regulation must be declared void.

OPINION OF MR VILAÇA — CASE 7/87

submission of the amended proposal, in this The Commission considers that the rule case 1 July 1986'. laid down by the Court for the application of Article 65 (2) applies a fortiori to Article 64 which, moreover, was the legal basis for Regulation No 14 146. The Commission, quite rightly, alleges 3087/78 of 21 December 1978 which that decision to be illegal, on the following was challenged in Roumengous, and for grounds : the amending regulation of 19 December 1983;

(a) the purpose of reviewing the weightings, as is apparent from Article 64 of the (c) the Commission also challenges the two Staff Regulations, is to monitor and reasons for which, according to the ensure the purchasing-power equiva­ Council, it was impossible to determine, lences of officials' remuneration, for with sufficient accuracy, the situation which reason the adjustment must take obtaining at 1 January 1981. effect from the time at which the change in purchasing power was determined (1 January 1981);

COMMISSION v COUNCIL

as exactly as possible as at the reference 151. The Staff Regulations and the decision date; which laid down the appropriate method of implementation require 'the ratios between weightings acccurately to reflect purchasing-power equivalences between (d) finally, the Commission considers the salaries paid to staff' in the various places of Council's choice of 1 July 1986 to be at employment. odds with the very terms of the regu­ lation, in which the Council admits that 'a certain drift has been recorded in the 152. Periodical verification of the purchasing-power parities between weightings will bring about their adjustment officials' and in which mention is made whenever it indicates that changes in the of the dates on which the weightings cost of living are altering the ratios between were reviewed (1980, 1984 and 1985) purchasing power and detracting from the before 1 July 1986. equivalence thereof.

153. Accordingly, the conclusion is ines­ capable that the adjustment must be made In addition, the Council's choice ('the with effect from the time to which the first suitable date after the submission of review of the purchasing-power parities the amended proposal') is regarded by related, when it was decided that the the Commission as arbitrary and existing weightings no longer accurately meaningless. reflected them.

1 July 1986 would mean that no less than 10 was possible, by interpolation, to relate the years had passed since the previous review. figures to 1 January 1981. That is a technique which is used universally; admittedly, it does not guarantee 100% certainty as to the results obtained, but that 158. It is true that the lapse of time since the applies to all techniques used in statistics. reference period makes the calculations The Council itself, moreover, appears not to more delicate. But it does not seem to me have been able to avoid using it since, in the that that argument can be used to oppose proposal from its own General Secretariat the retroactive application of the weightings. on which the contested regulation was based, it is stated that the new weightings were calculated by extrapolating to 1 July 1986 the data from the national accounts 159. It must be borne in mind that the only used for the verification of 1 January 1981. factor in dispute is the 'accommodation item' (and, it would appear, as far as the technical experts are concerned, only — or basically — with respect to London), since 163. Moreover, the point made by the all the other cost-of-living items were Council concerning the financial cost of the calculated, without being challenged, as at 1 operation is not a valid argument against January 1981, on the basis of surveys retroactive application. It is not a carried out in 1980 and 1981. consideration on which the Council may rely in order to oppose fulfilment of the requirements of the Staff Regulations and satisfaction of the legitimate expectations of 160. The information concerning rents was officials arising therefrom. initially obtained from national accounts (first Commission proposal) and then (second proposal) determined by the surveys 164. It now remains to determine the exact carried out in 1984 and 1985, the results of date to be adopted. which were, by interpolation, related to 1 January 1985.

IV — Conclusion

172. In view of all the foregoing, I consider that the Commission's action should be upheld and consequently that Council Regulation No 3619/86 of 26 November 1986 correcting the weightings applicable to the remuneration and pensions of officials and other servants of the European Communities working elsewhere than Brussels and Luxembourg must be declared void.

173. To avoid any discontinuity in the system of remuneration, I consider it appro­ priate to accede to the Commission's request that the Court should:

declare, pursuant to the second paragraph of Article 174 of the Treaty and as it 15 did in its judgment of 5 June 1973 in Case 81/72, that, with respect to the application of Article 65 of the Staff Regulations, the annulled regulation is to continue in effect until the Council adopts the new regulation.

174. Since neither of the parties has asked for costs, each should bear its own.

15 — Commission v Council [1973] ECR 575, at p. 587.