C-106/96

UNITED KINGDOM v COMMISSION

OPINION OF ADVOCATE GENERAL TESAURO delivered on 22 January 1998 *

1. In these proceedings under Article 173 of In an early move towards that goal, one of the EC Treaty, the United Kingdom is asking the priority targets identified by the Council the Court to annul the decision(s) impliedly in its Resolution of 21 January 1974 concern­ contained or provided for in the Commis­ ing a social action programme 1 was the sion's press release of 23 January 1996 implementation of specific measures to com­ announcing the grant of funding worth bat poverty, specifically by drawing up pilot ECU 6 million net for 86 projects designed schemes. to overcome social exclusion.

However, in affirming its support in prin­ 3. In implementation of that resolution, the ciple for Community action to combat social Council adopted over the following years a exclusion, the United Kingdom raises no series of decisions providing for multi- objection to the Court's placing a temporal annual programmes to combat poverty and limitation, pursuant to Article 174 of the social exclusion. Since the Treaty conferred Treaty, on the effects of such annulment. no specific powers for that purpose, the legal basis for all those decisions was Article 235.

Facts

Hence the relevance, first of all, of Council Decision 75/458/EEC of 22 July 1975 con­ cerning a programme of pilot schemes and studies to combat poverty, 2 followed by 2. To improve the quality of life enjoyed by Council Decision 85/8/EEC of 19 December the various peoples of the Member States has 1984 on specific Community action to always been one of the Treaty's fundamental 3 combat poverty, which set up a four-year objectives, provided for in Article 2 of the programme (1985-88) and, lastly, Council original version thereof and strengthened by Decision 89/457/EEC of 18 July 1989 the amendments made to that provision by the Treaty of Maastricht.

6. During 1995, the Commission decided to give partial effect to that budget line by 4. With the clear intention of further pro­ drawing up 86 funding agreements with vari­ moting such action, the Commission submit­ ous bodies, selected on the basis of a wide ted to the Council a proposal for a decision range of projects previously submitted. This — also based on Article 235 of the Treaty — entailed a commitment of approximately adopting a medium-term action programme ECU 6 million. to combat exclusion and promote solidarity: a new programme to support and stimulate 5 innovation (1994-99). The draft proposal (hereinafter 'Poverty 4'), which was intended to cover the period from 1 July 1994 to 31 December 1999, was not adopted by the 6 Council; nor, in due course, were any deci­ Notification of those agreements was given sions taken establishing comparable pro­ in the Commission's press release of 23 Janu­ grammes. ary 1996, to which a list of the selected projects was attached. That press release is the measure contested in these proceedings.

5. The general budget of the European The parties' arguments 7 Union for the financial year 1995, which had meanwhile been adopted, committed

4 — OJ 1989 L 224, p. 10. 5 — This proposal was not published in the Official Journal of the European Communities. Sec COM (93) 435 final of 22 7. The United Kingdom seeks essentially a September 1993. declaration that the decisions by which the 6 — It is apparent from statements made by the parties that from mid-1995 onwards opposition from two of the Member Commission concluded the agreements in States (the Federal Republic of Germans and the United question are void, alleging that the grounds Kingdom) was certain to prevent the decision's adoption. 7 — OJ 1994 L 369, p. 1. for their illegality are twofold.

9. On the basis of Article 205 of the Treaty, it is for the Commission to implement the budget, which it must do within the limits of Secondly, the decisions adopted by the Com­ the appropriations, on its own responsibility mission are not properly reasoned and and having regard to the financial regulations should therefore be annulled for infringe­ which the Council must adopt in accordance ment of Article 190 of the Treaty. In its with the procedure laid down in Article 209 reply, the Government of the United King­ of the Treaty. dom sets out more fully its plea as to lack of reasoning, explaining that it is directed not at the decisions authorising the individual funding agreements, but at the policy decision — on which such action was predi­ cated — to implement, in accordance with Article 22 of the Financial Regulation of certain criteria and procedures, that item of 21 December 1977 applicable to the general budgetary expenditure. budget of the European Communities (here­ 8 inafter 'the Financial Regulation'), as amended — so far as is relevant here — in 9 1990, provides that 'the implementation of appropriations entered for significant Community action shall require a basic act, in accordance with the procedure and the

The Federal Republic of Germany, the Kingdom of Denmark and the Council 8 — OJ 1977 L 356, p. I. have intervened in support of the applicant 9 — Council Regulation (Euratom, ECSC, EEC) No 610/90 of Government on the basis of broadly similar 13 March 1990 amending die Financial Regulation of 21 December 1977 applicable to the general budget of the Euro­ reasons. pean Communities (OJ 1990 L 70, p. 1).

provisions laid down in Chapter IV, para ments, 1 especially in view of the fact, graph 3(c), of the Joint Declaration of already mentioned, that the principle in 30 June 1982'. As we know, this provision question has been 'consolidated' in the constitutes an attempt to solve the problem Financial Regulation following the 1990 of the Commission's competence, when amendment. Suffice it to note that the insti implementing the budget, to use the appro tutions subsequently reaffirmed the require priations under particular budget lines not ment of a legal basis for significant action withstanding the absence of a basic act. when they adopted the Interinstitutional Agreement of 29 October 1993 on budgetary discipline and improvement of the budgetary

10 improve the budgetary procedure. Chapter IV, paragraph (3)(c), of the Declaration pro vides: 'The implementation of appropriations entered for significant new Community 11. Thus, legislation exists which requires a action shall require a basic regulation. If such dual legal basis for the Commission's imple- appropriations are entered the Commission is invited, where no draft regulation exists, to present one by the end of January at the latest'. 11 — Interinstitutional agreements, like joint declarations, have clear authority for the purposes of interpretation, above all where their content is consolidated, as in the present case, in binding Community acts. Furthermore, where it is clear from an interinstitutional agreement or joint declaration that the institutions concerned intended to enter into a binding commitment towards each other, this must be rec ognised, in the light of the principle of interinstitutional cooperation laid down in Article 5 of the Treaty, as giving rise to a legal obligation, failure to observe which is action able in proceedings before the Court: see, in connection with an 'arrangement' between the Council and the Com mission, Case C-25/94 Commission v Council [1996] ECR I-1469, paragraph 49; for an earlier judgment, actually con cerning the 1982 Joint Declaration, see Case 204/86 Greece v Council [1988] ECR 5323. For academic commentary, see M. and D . Waelbroeck, 'Les "Déclarations Communes" en tant qu'Instruments d'un Accroissement des Compétences du Parlement Européen', in Louis, D . Waelbroeck, Le Par- There is no need to dwell on the question of lement Européen dans l'Evolution Institutionnelle, Brussels, 1988, p. 79; Thiaville, Déclarations Communes, in Barav, the legal authority now attributed to joint Philip, Dictionnaire Juridique des Communautés Europ- declarations and interinstitutional agree éennes, Paris, 1993, p. 341; Monar, 'Interinstitutional Agree ments: the Phenomenon and its New Dynamics after Maas tricht', CMLRev 1994, p. 693.

12. The Court's case-law has confirmed, albeit merely by implication, that there are two pre-conditions for the proper imple­ mentation of the budget. In a case where the 13. The delimitation of the Commission's applicants contested the lawfulness of a regu­ sphere of competence, concerning implemen­ lation laying down time-limits and detailed tation of the budget, in relation to the Coun­ rules for recruitment to the Commission of cil's power to adopt the act committing the staff employed by the European Association expenditure, was addressed in the Court's for Cooperation on the ground that its pro­ 16 judgment of 24 October 1989. The visions were at odds with the relevant budget Commission's argument, which the Court appropriations, the Court stated that 'neither the budget nor a fortiori an explanatory remark, though necessary in order to under­ take expenditure, can be substituted for the 14 — Joined Cases 87/77, 130/77, 22/83, 9/84 and 10/84 Salerno and Others v Commission and Council [1985] ECR 2523, provisions of the Staff Regulations dealing paragraph 56, in which the Court accordingly upheld the Council's argument that existence of an appropriation in the Community budget is a necessary, but not a sufficient, condition for implementing expenditure. 15 — Case 294/83 Les Verts v Parliament [1986] ECR 1339, para­ 13 — Needless to say. Out twofold requirement for implementa­ graph 28. The distinction between legislative powers and tion of expenditure is the reflection in technical budgetary budgetary powers, the exercise of which is subject to differ­ terms of a much wider problem regarding the institutions, ent conditions, thereby reflecting the different forces at play which finds expression in the separation which persists even in the institutions, is reaffirmed once again in Case 242/87 today between the branch of the budgetary authority which Commission v Council[1989]ECR 1425, paragraph 18. is naturally suited to a legislative role (the Parliament) and 16 — Case 16/88 Commission v Council [1989] ECR 3457. The the Community legislative authority which is still concen­ Commission asked the Court to annul the provision in trated in the Council, at least in cases where the legal basis Council Regulation (EEC) No 3252/87 of 19 October 1987 requires unanimity. See, regarding the inevitable divergence (OJ 1987 L 314, p. 17) making the Commission's power to between the positions of the institutions concerned, Ehler- implement Community research programmes subject to the mann, Minch, 'Conflicts between Community Institutions Management Committee procedure, since this enables the within the Budgetary Procedure — Article 205 of the EEC Council to substitute its own projects for those of the Treaty', in EuR, 1981, p. 23; Terrasse, Le Budget de la Commission in cases where the Committee delivers an Communauté Européenne, Paris, 1991, p. 72. adverse opinion.

rejected, was essentially based on the premiss notion of committing expenditure, which has that individual decisions which the Commis­ led the Court to regard the Commission's sion must adopt in order to give effect to adoption of individual administrative mea­ programmes (in particular, the conclusion of sures committing expenditure as separate 18 agreements) are implicit in the notion of from implementation of the budget, the implementing the budget, in regard to which case-law fully upholds the principle that the Commission enjoys, pursuant to Article implementation of expenditure presupposes 205 of the Treaty, an independent power of not only the entry of a budgetary appropria­ decision which cannot be fettered by tion, but also the existence of a basic act recourse to cumbersome committee proce­ which accords such expenditure legal autho­ 19 dures. Instead, the Court favoured the con­ risation. trary approach espoused by the Council, according to which such individual decisions were in fact basic acts (or substantive deci­ sions) conferring legal authority on the expenditure and enabling the budget to be implemented, that is to say, by using the rel­ 15. As I mentioned earlier, the principle evant appropriation. consistently upheld by the Court that the proper implementation of expenditure requires both a budgetary appropriation and a legal basis justifying it has found expres­ sion in legislation, to be precise in Article 22 of the Financial Regulation, which in that In short, according to the Court, only the respect gave effect to the 1982 Joint Declara­ last stage in the procedure falls within the tion. Commission's exclusive competence under Article 205 to implement the budget. On the other hand, the decision-making stage at which expenditure is committed, or the adoption of an administrative measure imposing a legal obligation vis-à-vis third However, in view of the need to resolve the parties, is governed by the rules of the practical difficulties arising from the interin- decision-making procedure applicable in the stitutional management of the budget pro­ particular case and remains outside the scope cedure, Article 22 of the Financial Regu­ of the 'implementation of the budget' under lation, like the Joint Declaration, requires the 17 Article 205. prior adoption of a basic act for the purposes of implementing appropriations entered for

16. Turning to the substance of the dispute, the central question is therefore whether or not the Commission's funding of the 86 projects is to be classed as significant action. If, as the United Kingdom maintains, it is, then, in the absence of a basic act, the appro­ priation entered under budget line B3-4103 Albeit not embodied in a formal act or state­ should not have been implemented and the ment, a guide to interpreting the concept of related measures adopted by the Commis­ non-significant action — all the more useful sion must be annulled. If, on the other hand, in that it emerged from interinstitutional dia­ such action may plausibly be regarded as logue — is provided by the Statement non-significant, no basic act is required for entered in the minutes of the interinstitu­ the expenditure to be lawful and, accord­ tional meeting of 28 June 1982 between the ingly, the grant of funding by the Commis­ Council, the Parliament and the Commis­ sion is valid. sion. The representatives of the three institu­ tions, who were due to sign the 1982 Joint Declaration only two days later, acknowl­ 20 — The wording of the regulation differs from that of the Joint edge that the requirement that a legal act Declaration in two ways. First, instead of a basic 'regu­ lation', it requires a basic 'act'; secondly, it requires this in should be adopted before appropriations respect of significant Community action, not just signifi­ entered in the budget for any significant cant new Community action. However, these changes are not particularly important: the first clearly implies that any Community action can be used would enable legislative act (for instance, a decision addressed to all die Member States) is capable of serving as the legal basis for the Commission to assume its rightful role the expenditure; the reason for the second difference is not and in particular exercise its powers of initia­ clear, out possibly the adjective has been omitted simply because it was superfluous. tive by initiating, on its own responsibility,

Non-significant action is inherently a tenu­ Therein lies the justification for the Com­ ous undertaking, in the sense that, after a mission's power to fund pilot projects or while, it must either give way to significant preparatory action solely on the basis of a action (whose implementation depends on budgetary appropriation and its powers of the adoption of a basic act) or come to an implementation under Article 205 of the end. In an attempt to introduce a greater measure of certainty, the Commission pro­ poses a maximum duration of three years.

21 — The text of the statement is set out in Annex 2 to the Com­ mission's communication to the budgetary authority on legal bases and maximum amounts of 6 July 1994 (SEC(94) 1106 final). See also the reference to the declaration by way 22 — See, to that effect, Strasser, Les Finances de l'Europe, cited of clarification of the concept of non-significant Commu­ nity action as used in the 1982 Joint Declaration, in Strasser, in footnote 21, p. 131. Les Finances de l'Europe, Paris, 1990, p. 131. 23 — See footnote 21 above.

I - 2738

UNITED KINGDOM v COMMISSION

Thus non-significant action is an exception social exclusion, and representing the to the normal operation of the budget and continuation of action taken earlier, is now the utilisation of appropriations. As such, it categorised as 'non-significant'. must be subject to narrow interpretation. Although this may to a certain extent stand in the way of more streamlined Community action, it is none the less consistent and is strictly aimed at giving full effect to the basic principle of legality, which must be reflected Although the position adopted by the Com- in every aspect of the procedure for imple­ mmission is not conclusive, it constitutes, at mentation of the Community budget. the very least, powerful evidence of a some­ what 'casual' approach, which may well be directed to a more efficient management of the resources allocated but falls somewhat short of respect for the principle of legal­ 26 ity.

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OPINION OF MR TESAURO — CASE C-106/96

examples, pleading practical consider­ Similarly, the proposal for a decision on the ations. The first concerns funding for one draft 'Poverty 4' programme made provision year of a literacy programme for families in for the Commission to implement action at disadvantaged areas, with the aim of facilitat­ local level (as well as at national or regional ing their access to employment. The second level) aimed at the economic and social inte­ concerns a programme for the training of gration of disadvantaged groups. Those young unemployed persons from areas with projects were to have been implemented by a high level of youth unemployment. The social networks and volunteer groups, which third concerns a one-year programme to is essentially what the bodies with which the assist the rehabilitation of teenage mothers, Commission has concluded the agreements and unemployed persons suffering from at issue are. alcoholism.

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UNITED KINGDOM v COMMISSION

social exclusion, but rather to dovetail neatly of coordination resulting therefrom, is again with projects funded under previous pro­ a formal consideration, unconnected with the grammes. aims and specific working methods of the action itself. Moreover, the 86 projects at issue are in any event assured of a coordinat­ ing mechanism, if only through the direct intervention of the Commission.

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OPINION OF MR TESAURO — CASE C-106/96

I would refer in particular to the Resolution Article 4, in connection with the implemen­ on the Commission's communication to the tation of the budget. The allegation made budgetary authority concerning legal bases by the applicant Government is therefore 30 and maximum amounts, in which pilot well founded. projects or preparatory action are identified as non-significant action, and to the Resolu­ tion of 24 October 1996 on the draft budget for the financial year 1997, which fixes a ceil­ ing of ECU 10 million but always and only — Lack of reasons with reference to pilot projects and prepara­ tory action.

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UNITED KINGDOM v COMMISSION

budgetary authority of 18 July 1995, a press The limitation in time of the effects of release of 11 August 1995 and a letter to the annulment United Kingdom Ministry of Social Security of 13 September 1995.

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OPINION OF MR TESAURO — CASE C-106/96

Costs ordered to pay the costs. Since all the pleas in law put forward by the Commission have failed, it must be ordered to pay the costs. Under Article 69(4) of those Rules, the Member States and the institutions which 30. Pursuant to Article 69(2) of the Rules of have intervened must be ordered to bear Procedure, the unsuccessful party is to be their own costs.

Conclusion

31. In the light of the foregoing, I propose that the Court:

(1) annul the Commission's decision(s) notified by the press release of 23 January 1996 announcing the grant of funding under the 1995 budget for 86 projects designed to overcome social exclusion;