C-284/90

OPINION OF MR JACOBS —CASE C-284/90

OPINION OF MR ADVOCATE GENERAL JACOBS delivered on 17 October 1991 *

* Original language: English.

I - 2298

COUNCIL v PARLIAMENT

on 17 September 1990, the Council requests Decision of 1988 (cited above in paragraph the Court to: 2). In what follows, I shall refer to the current decision as the 'Own Resources Decision' or as the '1988 Decision', and to its predecessors as the '1970 Decision' and the '1985 Decision' respectively. (1) annul BRS No 2, adopted by the Parliament on 11 July 1990, as published in the Official Journal;

I - 2299

OPINION OF MR JACOBS—CASE C-284/90

6. Article 199 of the Treaty, first paragraph, GNP of the Member States ('GNP provides that all items of revenue and resources'). expenditure of the Community shall be included in estimates to be drawn up for each financial year, and shall be shown in the budget. The second paragraph of Article 199 provides that: By Article 3(1) of the 1988 Decision, the total amount of own resources may not exceed 1.2% of the total GNP of the 'The revenue and expenditure shown in the Community (and, for the years 1988 to budget shall be in balance.' 1992, may not exceed certain specified percentages).

I - 2300

COUNCIL v PARLIAMENT

Member State is determined in two stages. and is set at an amount which will allow First, a uniform rate of VAT resources is estimated revenue to cover estimated expen­ determined in accordance with Article 2(4), diture for that year. Since actual expen­ which provides that: diture may fall short of estimated expen­ diture in a given year, or the total revenue from own resources may exceed projections, there may be a surplus of revenue over expenditure at the end of a financial year. 'The uniform rate ... shall correspond to Article 7, first sentence, of the 1988 the rate resulting from: Decision accordingly provides that:

(a) the application of 1.4% to the VAT 'Any surplus of the Communities' revenue assessment base for the Member States, over total actual expenditure during a and financial year shall be carried over to the following financial year.'

(b) the deduction of the gross amount of Similarly, the first paragraph of Article 32 the reference compensation referred to of the Financial Regulation provides that: in Article 4 ( 2 )... '

Instead, part only was entered, leaving a 13. By virtue of Article 15(2) of the further remainder of some ECU 880 million Financial Regulation, as amended by Article (later adjusted to ECU 780 million). It was 1, point 20 of Council Regulation envisaged that part of the latter sum would No 610/90, the budgetary procedure as set be entered in a third amending and out in Article 203 of the Treaty is applicable supplementary budget for 1990, leaving a (mutatis mutandis) to amending and final residue to be entered as revenue in the supplementary budgets.

12. The Commission was conscious that its revenue for the financial year 1990. As a proposed method of dealing with the 1989 result, a lower rate of VAT resources was surplus did not respect the literal terms of required than the amount specified in Article 32 of the Financial Regulation, Article 2(4) of the 1988 Decision. In the which, as will be recalled, provides that any view of the Council, however, the lesser evil surplus for a given financial year shall be was to depart from the literal meaning of entered as revenue in the budget for 'the Article 2(4) of the Own Resources Decision, following financial year'. It will also be rather than from Article 7 of the decision recalled that Article 7 of the Own and Article 32 of the Financial Regulation. Resources Decision is in similar terms.

The additional amount could not be used to Parliament accordingly purported to amend reduce the uniform rate of VAT resources, the draft budget pursuant to the second because the Commission took the view that subparagraph of Article 203(4), so as to the latter was fixed at 1.4%, less an amount restore the Commission's original proposal corresponding to the United Kingdom for dealing with the surplus. At the next correction (see above, paragraph 9). Thus, if stage of the budgetary procedure, however, all the 1989 surplus were entered as revenue the Council exercised its power of modifi for 1990, the result would be a budget in cation under Article 203(5)(a) by rejecting which revenue and expenditure did not the Parliament's amendments, while balance, contrary to Article 199 of the contesting its power to make any Treaty. amendments to the revenue provisions of

the budget. The Parliament, in its turn, Resources Decision and Article 32 of the restored the disputed amendments, acting Financial Regulation, as well as to the pursuant to Article 203(6) of the Treaty, general budgetary principle of 'annuality, and proceeded to adopt BRS No 2 that is to say the principle that budgetary accordingly. The President of the provisions are related to a particular Parliament then declared, pursuant to financial year. Although the Council, in Article 203(7), that BRS No 2 had been paragraph 25 of its application, claims that finally adopted. the Parliament has in consequence infringed an 'essential procedural requirement' within the meaning of the first paragraph of Article 173 of the Treaty, I think it would be more accurate to characterize the alleged 15. As I have already mentioned, both the infringement as one of 'this Treaty or of adoption of the budget and the President's any rule relating to its application' within declaration that it has been adopted are the meaning of the same provision. challenged by the Council in these proceedings, although the grounds of annulment are in each case the same. In its defence, the Parliament contests each of 17. The three amendments contested by the those grounds, and raises in addition two Council are: (1) an amendment to Article objections of admissibility. Since the latter 130 of the draft budget, relating to the objections concern the form of the order amount of VAT resources; (2) an sought by the Council, rather than the amendment to Article 140, relating to the admissibility of the application as a whole, I amount of GNP resources; and (3) an shall deal with the Council's grounds of amendment to Article 300, relating to the annulment first, and only then turn to the amount of surplus from 1989 entered as issues of admissibility. Reversing what is revenue for the financial year 1990. Since perhaps the logical order, I shall consider the second of the three amendments is the grounds of annulment in the order in consequential upon the other two, and which they are treated in the Council's results from an application of the special application; thus, I shall first consider the rules apportioning the cost of the United issue of the legality of the specific Kingdom correction, I shall discuss amendments made by the Parliament, and amendments (1) and (3) first, before turning then the question of the Parliament's to (2). general right to amend revenue provisions of the budget.

19. Article 300 of BRS No 2 enters, as revenue for 1990, a part only of the surplus still remaining from the preceding financial 21. According to the Council, Article 7 of year. As we have already seen, the reduction the Own Resources Decision and Article 32 in the amount of surplus entered, as of the Financial Regulation require the compared with the figure in the Council's entire amount of the surplus for 1989 to be draft, reflects the fact that as a result of the carried over to 1990. The relevant Parliament's amendment to Article 130, provisions do not allow any choice as to more revenue would be available than was how much of the surplus should be carried necessary to balance the budget for 1990. forward to the following year. Given that Thus, the amendment to Article 300 avoids the budget must balance (principle (3) the budgetary imbalance which would above), the consequence must be that a otherwise result from the amendment to lower uniform rate of VAT resources is set Article 130. than the rate which would otherwise apply under principle (2). The 1.4% rule in Article 2(4) of the Own Resources Decision is therefore not inviolable: if it comes into conflict with the other two principles, it is 20. It will be recalled that three budgetary the one which must yield. rules, each apparently mandatory, could not be satisfied simultaneously in the financial year 1990:

23. It seems to me however that the latter 24. I turn therefore to the interpretation of argument assumes what it is trying to prove. the Own Resources Decision. I share the If the figure of 1.4% were indeed Parliament's view that the interpretation of immutable, there could of course be no the 1988 Decision is assisted by a question of returning any of the resulting consideration of its predecessor decisions of VAT resources to the Member States, since 1970 and 1985 (cited above in paragraph 4). the Communities' own resources, once definitively called up, belong by definition to the Communities. The question however is precisely whether, on a true interpretation of the Own Resources Decision, the figure of 1.4% is indeed immutable, or whether it can, at least in exceptional circumstances, be adjusted in the course of the budgetary procedure. As the Council pointed out at 25. It will be recalled that the 1970 the hearing, it is misleading to refer to such Decision was the first decision taken an adjustment as a 'reimbursement' of funds pursuant to Article 201 of the Treaty, for to the Member States, as if the level of VAT the purpose of replacing a system of resources set in the Commission's proposal financial contributions with a system of own had already been transferred from the resources. The 1970 Decision introduced Member States to the Communities. The the new system in two stages: Article 2 question at issue is not whether VAT introduced an 'agricultural levies' resource resources called up in the 1990 budget and a 'customs duties' resource, with effect should be returned to the Member States, from 1 January 1971; Article 4(1) then but rather what amount of such resources introduced a further resource, effective from should be called up given the expenditure 1 January 1975, to be obtained by applying needs for that year. Similarly, it does not a rate not exceeding 1% to the VAT seem to me to be helpful to classify the rule assessment base of the Member States that a surplus may not be carried over to (Article 4(1), second subparagraph). The more than one subsequent year as merely final introduction of this VAT resource had 'technical'. Indeed, given the fundamental however to await the rules determining the character of the principle of 'annuality', of uniform assessment base, and in the event which that rule is one expression, the appro­ did not take place until the 1980 financial priateness of the label may be questioned. year. In the mean time, interim

27. What conclusions should be drawn from the fact that the rule for the carrying over of the surplus, introduced for the first time by Article 4(5) of the 1970 Decision, is stated to apply from the date of the full 28. The second possible interpretation of introduction of the VAT resource? There Article 4(5) is therefore that the rule for the are, it seems to me, two possibilities. The carrying over of the surplus was to be first possibility is that, before the complete applied even before the complete intro­ application of the second subparagraph of duction of the VAT resource. As we have Article 4(1), a surplus is not carried over to seen, that conclusion would be based on the the next financial year, but rather returned argument that, even before the VAT to the Member States. The justification for resource has been finally introduced, the such a result would be that before the revenue raised for the financing of the complete introduction of the VAT resource, Community budget should be regarded as the Community budget is still financed in Communities' own resources.

I - 2306

COUNCIL v PARLIAMENT

30. In my view, the Parliament's interpre­ tation cannot be accepted. Although, as we have seen, the introductoiy wording of Article 4(5) of the 1970 Decision gives rise 32. In principle, a potential excess of to a certain degree of ambiguity, it seems to revenue over expenditure need not only me that it is clear, in any case, that once the arise when there is a surplus to be carried VAT resources have been fully introduced over from the preceding year. An excess (in the event, from the financial year 1980), could arise independently of any preceding the rule for the carrying over of the surplus surplus, for instance if expenditure estimates is to be applied without qualification. Thus, for a given financial year were abnormally Article 4(5) refers in general terms to 'any low. On the Parliament's interpretation of surplus of the Communities' own resources', Article 2(4) of the decision, it would still be and is not limited to any particular kind of necessaiy to call up the full rate of VAT resources, or to any specific amount of resources (based on a starting figure of surplus. The corresponding article of the 1.4%), even when it was known that doing 1985 Decision (Article 6) is in similarly so would lead to an excess of revenue over general terms, and for obvious reasons does expenditure, that is to say to a violation of

I - 2307

OPINION OF MR JACOBS —CASE C-284/90

Article 199 of the Treaty. An examination 35. Like its predecessors, therefore, the of the three Own Resources decisions 1988 Decision is founded upon the premise shows, in my opinion, that such an interpre­ that the existing means of financing the tation is untenable, and it is to be noted that Community budget require supplemen­ such a conclusion can be reached even tation. Thus, the second recital to the 1988 without reliance upon Article 7 of the 1988 Decision declares that 'the resources Decision. available within the limit of 1.4% are no longer sufficient to cover the estimates of Community expenditure'. The fourth recital declares :

34. When the 1985 Decision was replaced by the 1988 Decision, the 1.4% limit on the rate of VAT resources had itself been found to be insufficient. The 1988 Decision 36. Thus, neither the Community legislator accordingly introduced a new or 'fourth' when it adopted the 1988 Decision, nor the category of resource, obtained by applying a Member States when they ratified the uniform rate to GNP. The Parliament is of decision, can be said to have contemplated course correct in saying that the new the possibility that the rate of 1.4% might resources take over the role of 'residual' be more than sufficient in a given year. category, adjustable according to the need There is therefore no cause to impute to the to balance Community revenue and expen­ authors of the decision an intention to diture. The reason the VAT resources are derogate from the fundamental principle, not a residual category in the context of the enshrined in the Treaty, that revenue and 1988 Decision, however, is that the decision expenditure shown in the budget must assumes that a rate of 1.4% will not be balance. Indeed, given that Article 199 of adequate to cover Community expenditure. the Treaty is cited as a legal basis for the

I-2308

COUNCIL v PARLIAMENT

decision, it must be assumed that they did invalid. Article 300 is invalid because it not intend to derogate from that principle, violates Article 7 of the Own Resources even supposing such a derogation were Decision and Article 32 of the Financial possible. Moreover, as the fourth recital to Regulation. Article 130 is invalid because it the decision makes clear, the decision is provides for the calling up of an amount of founded on the principle that revenue is to VAT resources which would violate Article be based on necessary expenditure, and the 199 of the Treaty. principle that revenue and expenditure must balance is also mentioned in Article 203(10) of the Treaty.

38. There can therefore be no obstacle to entering the full amount of the surplus from 1989 in an amending or supplementary 41. It might at first sight seem surprising budget for 1990, in accordance with Article that it was considered necessary to raise any 7 of the Own Resources Decision and amount of GNP resources in BRS No 2. Article 32 of the Financial Regulation. The On the Commission's own estimation, some uniform rate of VAT resources can then be ECU 780 million still remained of the reduced so as to ensure that no more surplus from 1989: why then was it revenue is raised than is judged necessary to necessaiy to ask the Member States to pay a cover estimated expenditure. further amount of nearly ECU 95 million, given that the Community already had sufficient funds? As the parties explained, however, in response to a written question of the Court, their respective positions on the GNP resources were merely the logical 39. It follows, in my view, that Article 130 consequences of the positions adopted on and Article 300 of BRS No 2 are each the uniform rate of VAT resources.

I - 2309

OPINION OF MR JACOBS —CASE C-284/90

43. As we have already seen (at paragraph 9 above), the correction in favour of the United Kingdom is borne by the other Member States in proportion to their respective GNPs. If 1.4% is taken as the starting point for the calculation of the rate of VAT resources, the amount paid by a given Member State is determined, in the first place, by deducting from 1.4% an amount corresponding to the compensation to be paid to the United Kingdom: the resulting figure is the uniform rate of VAT 45. It seems to me, moreover, that the fact resources (which the Parliament set at that the Parliament's interpretation of the 1.2557%). The next step is to add back on a Own Resources Decision leads to the second amount, calculated separately for raising of GNP resources from four of the each Member State as a function of its Member States is an additional reason for GNP. To the extent that the resulting figure rejecting that interpretation. For, as I have is greater than 1.4%, the excess amount already observed, the result is that resources must be called up under the heading of are called up, notwithstanding the fact that GNP resources, since the maximum VAT more revenue is already available than is rate is set at 1.4%. If, on the other hand, a necessary to finance both estimated starting figure of less than 1.4% is chosen, Community expenditure and the costs of the leading to a correspondingly lower uniform United Kingdom correction. In my view, it VAT rate, the cost of the United Kingdom is unlikely that such a paradoxical result can correction can be met in this instance have been intended, either by the without GNP resources being called up Community legislator when it adopted the from any Member State. The second Own Resources Decision, or by the solution is the one chosen by the Council, Member States when they ratified that which as we have seen proposed a uniform decision in accordance with Article 201 of VAT rate of only 1.2159%. the Treaty.

50. In my opinion, therefore, Articles 130, 140 and 300 of BRS No 2 are each defective, and hence BRS No 2 could not validly be adopted by the Parliament. 48. From Article 300 of BRS No 3, it can be seen that a further portion of the surplus from 1989 amounting to ECU 164 184 346 is entered, bringing the amount of surplus carried over to a total of ECU 3 645 156 464. Thus, even when the sum of The scope of the Parliament's power to ECU 819 million transferred to the EAGGF amend reserve is taken into account, it can be seen that the three amending and supplementary budgets for 1990 fail to deal with the entire remaining surplus from 1989. Of a total surplus of ECU 5 080 million, only ECU 4 464 156 464 is entered in 1990 (see BRS 51. Given that I have reached the No 3, Official Journal 1990 L 381, pp. 6 to conclusion that, even if the Parliament has a 7). power to amend the revenue provisions of

I-2311

OPINION OF MR JACOBS —CASE C-284/90

55. In support of its contention that the Parliament's power of amendment relates 53. It is clear that the right to amend the solely to non-compulsory expenditure, the draft budget is subject to the qualification Council argues as follows. First, the that, in the case of provisions of the budget Community budget is a 'budget de relating to compulsory expenditure, the dépenses', that is to say it is based on the Parliament merely has the power to propose need to finance projected Community modifications. Such modifications may be expenditure. Article 203 of the Treaty rejected by the Council under point (b) of accordingly lays down precise rules which the first subparagraph of Article 203(5). In govern the role of each institution in the the case of amendments, on the other hand, determination of expenditure, giving modifications to them made by the Council Parliament the last word on the level of under point (a) of that subparagraph may be non-compulsory expenditure in the same amended or rejected by the Parliament way that the Council is given the final say in under Article 203(6). Thus, in the case of regard to items of compulsory expenditure. amendments, the Parliament and not the As far as Community revenue is concerned, Council has the 'last word'. on the other hand, Article 203 is silent on

I-2312

COUNCIL v PARLIAMENT

appraisal. Although, as the Council any special rules for the amendment of concedes in its reply, the Parliament's power revenue provisions of the budget does not to amend the statement of non-compulsory imply that such amendments are excluded. expenditure must at least entail a power to Indeed, if it is true that (as the Council make consequential amendments to the argues) the legislative provisions would statement of revenue, those are the limits of leave the Parliament little discretion, since the Parliament's powers. It would, says the the statement of revenue is essentially Council, be illogical to allow the Council determined by the statement of expenditure, the last word in the determination of it is perhaps not surprising that the authors compulsory expenditure, but then permit the of the Treaty did not frame any special Parliament the final say as regards the procedural rules governing amendments to statement of revenue. revenue.

For is not entitled to use a power of amendment instance, the Parliament found it necessary in such a way as to frustrate the exercise of to reduce the Council's figures for revenue 5 the Council's powers; such behaviour would arising from the so-called 'crisis levy on the be a breach of the duty of sincere salaries of Community officials and others, cooperation embodied in Article 5 of the imposed by Council Regulation Treaty (see Case 230/81 Luxembourg v No 3821/81 of 15 December 1981 (Official Parliament [1983] ECR 255, paragraph 37 Journal 1981 L 386, p. 1), the ground of of the judgment, and Case 204/86 Greece v the Parliament's amendment being that the Council [1988] ECR 5323, paragraph 16 of relevant provisions were due to expire in the the judgment, and see also Case 149/85 course of 1991.

58. It seems to me therefore that there is no the budget in its entirety. While it is true good reason for denying the Parliament any that the Parliament would be confronted role in the establishment of the statement of with the same dilemma in the case of a revenue. I do not think that the Parliament provision relating to compulsory expen­ should be denied such a role, merely diture, in the latter case the result does at because to give it one would be to grant it least follow from the express wording of the the final say in the matter. As I have already Treaty. It does not seem to me that the mentioned, the exercise of such powers same result should be implied in a case, such would in any case be subject to the duty to as the present one, in which the Treaty is respect the relevant legislative provisions silent. and the powers and prerogatives of the other institutions. Moreover, from the point of view of the structure of the budgetary procedure, it is in fact the Parliament, and not the Council, which has been granted the last word. Thus, it is the Parliament which finally adopts the budget (Article 203(6)). The Parliament may, for 'important reasons', reject the draft budget in its entirety and ask for a new draft to be submitted to it (see Article 203(8)). 60. It should be noted, furthermore, that Furthermore, since Article 203(9) gives the where the Council is given the final say in Parliament the right, in certain circum­ the budgetary procedure, the possibilities of stances, to make a further increase in the judicial review are limited. It is the level of non-compulsory expenditure, the Parliament, and not the Council, which Parliament must have the final say in deter­ finally adopts the budget. The Parliament mining the rate of GNP resources necessary has the right to bring an action for to finance such expenditure (cf. Bernard annulment only in the limited range of Paulin 'Les pouvoirs du Parlement européen circumstances in which the action is brought en matière de ressources propres' in Guy to safeguard its prerogatives: see Case Isaac (ed.), Les ressources financières de la C-70/88 Parliament v Council [1990] ECR CE (Paris 1986), pp. 122-3). 1-2041, paragraph 27 of the judgment; but it is clear, in any case, that the Parliament could not bring an action against one of its own acts or against the act of its President. Nor, it seems to me, could the Parliament necessarily rely upon the Commission bringing an action (since the Commission and the Parliament may not always agree). Furthermore, the Parliament could not bring an action against the act of the Council establishing a draft budget: see Case 302/87 Parliament v Council [1988] ECR 5615, paragraph 23 of the judgment. At the hearing, the Council claimed it 59. If the Parliament were to be denied a should have the exclusive right to make power to amend the revenue provisions of errors in establishing the revenue provisions the budget in circumstances such as the of the budget, suggesting that such errors present ones, it would be required to adopt could always be corrected by the Court. In a budget it considered unlawful, with the reality, however, the Council is claiming the limited and drastic alternative of rejecting right to make errors which cannot be

63. In its application, the Council asks for the annulment of BRS No 2. It has been suggested by Advocate General Mancini in his Opinion in Case 34/86 Council v Parliament [1986] ECR 2155, at page 2175, 61. In my opinion, therefore, under the that a budget is strictly speaking merely an second subparagraph of Article 203(4) the accounting document containing two Parliament has the power, in certain circum­ statements relating respectively to revenue stances, to amend the provisions of the and expenditure. Although it may therefore budget relating to revenue as well as those be questioned whether the budget itself can relating to non-compulsory expenditure, be the object of an action for annulment, and the ground of annulment which relates the adoption of a budget by the Parliament to the scope of the Parliament's powers of at the end of the budgetary procedure, amendment is consequently to be rejected. pursuant to Article 203(6) of the Treaty, The Council has however in my view would at first sight seem to be a reviewable succeeded on its first ground. act, and the Council's application can be understood as requesting the annulment of such an act. It is true that adoption under Article 203(6) is only the penultimate step in the budgetary procedure, the final step being the President's declaration under Article 203(7) of the Treaty. It would Admissibility however be curious if the President's declaration were the only act capable of annulment. For the declaration made by the President is precisely that the budget 'has been finally adopted', that is to say that adoption has taken place pursuant to Article 203(6). Thus, although the act of the 62. Given the conclusions I have reached, I President is distinct from the act adopting must now consider what consequences flow the budget, it amounts in essence to a public from the invalidity of BRS No 2. In its proclamation that the prior act of adoption application, the Council requests the Court has already taken place. to annul both (1) BRS No 2, and (2) the President's declaration that the budget has been finally adopted. The Council also requests the Court to declare (3) that neither annulment shall call into question certain measures taken pursuant to BRS No 2. In its defence, the Parliament raised objections of admissibility to both (1) and 64. The Parliament argues, none the less, (3), and I shall consider each of those that the act of the Parliament adopting the objections in turn. budget cannot be the subject of annulment

' ... as far as the approval of the budget is concerned, the only measure which can be declared void emanates from an organ of the European Parliament and must therefore 65. It is true that in Case 34/86 Council v be attributed to that institution itself.' Parliament, the Court confined itself to annulling the President's declaration that the budget had been finally adopted, although the Council had also requested annulment of the budget itself. The Court did not however expressly state that the It is true that the 'measure' referred to in President's declaration was the only act that passage is the declaration of the which could be annulled. Instead, the Court President that the budget has been finally observed, in paragraph 46 of its judgment, adopted (see paragraph 23 of the that: judgment), and that the Court might therefore be interpreted as saying, in paragraph 24, that the President's declaration is the only measure which can be declared void. It seems to me however that the Court was not addressing, in that 'The effect of the annulment of the act of passage, the distinction between the act the President of the Parliament is to deprive adopting the budget and the act declaring the 1986 budget of its validity. It is adoption has taken place. The Court was therefore not necessary to give a decision on rather making the point that the only acts in the Council's claim for a total annulment of the budgetary procedure which are capable the budget.' of annulment are acts of the Parliament, as opposed to acts of the Council, and that the question of the Parliament's capacity to bring annulment proceedings was therefore not relevant in that context. Since it was the President's declaration which had in fact been annulled in the case cited to it (Case 66. In Case 302/87 Parliament v Council, 34/86), it was only natural for the Court to the question at issue was the capacity of the refer to that act, and to observe that it was Parliament to bring an action for annulment an act of an organ of the Parliament. under Article 173 of the Treaty. The Parliament argued, in particular, that in Case 34/86 the Court had implied that each branch of the budgetary authority must be able to take action if the other exceeded its powers, and that it was therefore incon­ 67. In my view therefore, Case 302/87 ceivable that the Council may take action Parliament v Council is not authority for the against the Parliament, but not the proposition that the act of the Parliament Parliament against the Council (see the adopting the budget cannot be the object of Report for the Hearing at p. 5624). The annulment proceedings. On the other hand,

68. As the Council points out in its reply, the circumstances of Case 34/86 Council v Parliament were somewhat different from those of the present case. In the earlier case, 70. In its rejoinder, the Parliament draws a the Council and the Parliament had not yet different analogy from the one suggested come to an agreement on the increase in the above, and one which it claims leads to the level of non-compulsory expenditure, and opposite conclusion. According to the consequently the budgetary procedure had Parliament, the annulment of the act of the not yet been completed (see paragraph 43 of Parliament adopting the budget would be the judgment, and see the fifth analogous to the annulment of the deliber­ subparagraph of Article 203(9) of the ations leading to a Council decision; the Treaty). It followed that there was no act of President's declaration, on the other hand, the Parliament adopting the budget. In is comparable to the act of the Council contrast, in the present case it is not adopting the decision which is signed by its disputed that the procedure laid down in President and appears as such in the Official Article 203 has been brought to a Journal. conclusion. The question at issue is whether the final steps in that procedure can be allowed to stand, or whether they must be annulled on grounds of invalidity.

73. It will be recalled that in Case 34/86 Council v Parliament (cited above in paragraph 63), the invalidity of the President's declaration followed from the 72. It seems to me therefore that it is fact that the budgetary procedure had not misleading to draw an analogy between the been completed. There was accordingly no President of the Parliament acting under existing act of the Parliament adopting the Article 203(7), and the President of the budget which could be annulled. Council when he acts on behalf of the Furthermore, there was no other act taken Council in signing the text of a measure in the course of the budgetary procedure which the Council has adopted. The which could have been reviewed by the President's declaration under Article 203(7) Court, since, as we have seen, preparatory has a function which is peculiar to the measures such as the establishment or budgetary procedure. The unique feature of amendment of a draft budget are not that procedure is the manner in which the reviewable acts (see above, paragraph 67). two branches of the budgetary authority In contrast, in the present case the cooperate in the production of the final budgetary procedure was duly completed, result, each institution in turn adopting a and issued in the final adoption of a budget position to which the other reacts. Hence by the Parliament under Article 203(6). the need, it seems to me, for a concluding Although the Parliament's resolution did act by a formally distinct personage, namely not in terms purport to adopt the budget, it the President of the Parliament. It is true is clear that that was its intended effect. It that the President is no more than an organ follows that the President was fully entitled of the Parliament; but in my view he is an to make his declaration. Since the act of the organ invested with a particular function for Parliament adopting the budget remains the purposes of Article 203(7), namely that valid until it has been annulled by the of ensuring that the budgetary procedure Court, it is not until such an annulment has has been duly completed. Such a function is taken place that the President's declaration particularly important where, unlike the can, in consequence, itself be declared present case, there is no formal resolution of invalid. Thus, in the present case the the Parliament, and the budget is 'deemed annulment of the act adopting the budget is to be finally adopted' (under the third not only possible, but can in addition be subparagraph of Article 203(4), the third seen to be necessary if the President's subparagraph of Article 203(5), or under declaration is itself to be annulled.

75. In its application, the Council asks the Court to declare that neither of the 77. It may be argued that it is in the requested annulments calls into question interests of legal certainty that the 'the validity of payments made or annulments requested by the Council should commitments entered into, or of own not call into question the validity of resources called up or levied, before the implementing measures which were taken close of the financial year 1990.' In its reply, before the date of delivery of the Court's the Council formulates its request somewhat judgment. The Parliament objects, however, differently, asking the Court to declare that that a declaration to that effect would neither annulment calls into question 'the deprive the Council's request of any validity of measures duly taken in substance: the Court would be taking away implementation of BRS No 2, the with one hand what it had granted with the institutions being obliged to adopt without other. Given that the Council can have no delay the appropriate budgetary provisions interest in demanding at the same time the which take account of the annulment'. annulment of the budget and the full preser­ vation of its effects, the Parliament argues that one or the other of its requests must be held to be inadmissible.

76. In declaring, in the interests of legal certainty, what actions and measures are not called into question by the annulment of a budget, the Court cannot of course be 78. It must first be observed that the bound by any particular formulation Council would have an interest in obtaining proposed by the applicant. I note a declaration of illegality, even if such a furthermore that in Case 34/86 Council v declaration were to have no practical Parliament the Court did not regard itself as effects. The parties have not in fact fully competent to declare a partial annulment of addressed the question of the practical the budget (see paragraph 42 of the consequences of illegality, and in particular judgment). It was rather for the Council the question of whether there are some

81. In my view, therefore, it is necessary for the Court to give express authority for such consequential adjustments to be made in 79. It seems to me that one solution to the budgets adopted after the date of the difficulty would be to preserve all of the Court's judgment. Such adjustments will effects of the annulled budget (both so that compensate any Member States which have, past transactions will not be affected and so as a result of the unlawful adoption of BRS that subsequent budgets will not suffer from No 2, paid more VAT or GNP own a consequential invalidity), but for resources than would have been the case if a adjustments to be made in the budgets for valid budget had been adopted, and will be subsequent years in order to compensate for made at the expense of any Member States the effects of the unlawful provisions. It will which have paid too little. be for the institutions responsible for the budgetary procedure to make the appro­ priate adjustments.

Costs

80. In taking such measures, however, it is clear that the institutions require a proper legal basis upon which to act. Article 176 of the Treaty requires (and therefore enables) the institutions to take the necessary 82. The Council has not made any request measures to comply with the judgment of for costs to be awarded against the unsuc­ the Court. If however the Court, in cessful party. The appropriate order annulling BRS No 2, merely preserved all therefore is that the parties should bear their its effects, it is not clear what consequential own costs.

I - 2320

COUNCIL v PARLIAMENT

5. Order the parties, including the intervener, to bear their own costs.

I-2321