C-62/97

1. By application of 12 February 1997, the 3. By decision of 12 April 1994, the Com­ Commission appealed against the judgment mission determined her place of recruitment of 12 December 1996 in Case T-33/95 and place of origin as Brussels, refusing to Lozano Palacios v Commission. 1 pay her the installation allowance, removal expenses or the daily subsistence allowance. It did, however, grant her the expatriation allowance. Mrs Lozano Palacios submitted a complaint, which was rejected by decision of 11 November 1994; however, her place of origin was subsequently determined as being Albacete, in Spain. On 8 December 1994 she By its appeal, the Commission seeks to have was made an established official with effect that judgment partially set aside. In its sub­ from 16 November 1994. mission, the Court of First Instance erred in that it annulled the decision of 12 April 1994 in so far as that decision refused to grant Mrs Lozano Palacios, an official in DG XXI, the installation allowance provided for in Article 5 of Annex VII to the Staff Regula­ 4. By application lodged on 16 February tions of Officials of the European Commu­ 1995, Mrs Lozano Palacios contested the nities (hereinafter 'the Staff Regulations'). Commission's decision of 12 April 1994 before the Court of First Instance. She spe­ cifically sought annulment of the decision in so far as it refused to grant her the installa­ tion allowance, reimbursement of removal expenses and the daily subsistence allowance; she also claimed that the Court of First 2. Mrs Lozano Palacios, who is of Spanish Instance should order the Commission to nationality and was an official with the Span­ make the payments due. ish Ministry of Social Affairs, worked in Brussels for a period of two years and nine months (from 1 May 1991 to 15 February 1994) as a national expert on detachment to the Commission. On 10 March 1994, follow­ 5. By judgment of 12 December 1996, the ing her success in an open competition, she Court of First Instance annulled the Com­ was appointed as a probationary official at mission's decision in so far as it refused to the Commission and posted to Brussels. grant Mrs Lozano Palacios the installation allowance. Accordingly, the Commission was ordered to pay that allowance, together * Original language: Italian. with default interest at the rate of 8% per 1 — [1996] ECR-SC II-1535. annum. The remainder of the application was

6. The Court of First Instance based its par­ tial annulment of the Commission's decision on the wording and purpose of Article 5 of Annex VII to the Staff Regulations (hereinaf­ ter 'Annex VII'), which provides for the installation allowance. The expatriation allowance referred to in Article 5 of Annex VII is granted, pursuant to Article 4(1)(a) thereof, to Officials ... who are not and have never been nationals of the State in whose territory the place where they are employed is situated, and ... who during the five years ending six months before they entered the service did not habitually reside 7. Article 5(1) of Annex VII provides that or carry on their main occupation within the 'an installation allowance equal to two European territory of that State'. For the months' basic salary in the case of an official purposes of that provision, 'circumstances who is entitled to the household allowance arising from work done for another State or or to one month's basic salary in other cases for an international organisation shall not be shall be paid to an established official who taken into account'. qualifies for expatriation allowance or who furnishes evidence of having been obliged to change his place of residence in order to comply with Article 20 of the Staff Regula­ tions'.

According to the case-law of the Court of First Instance, the purpose of the expatria­ tion allowance is to compensate for the inconvenience suffered by an official who is The second paragraph of Article 5(3) adds presumed not to have established, before his that 'the installation allowance shall be paid appointment, any lasting ties with the State 2 on production of documents establishing the in which he takes up his duties. Pursuant to fact that the official, together with his family if he is entitled to the household allowance, has settled at the place where he is 2 — Case T-43/93 Lo Giudice v Parliament [1995] ECR-SC employed'. II-189, paragraph 36.

Article 4(1)(a) of Annex VII, therefore, the place of employment in a permanent and Commission granted Mrs Lozano Palacios lasting manner for an indeterminate but sub­ the expatriation allowance. stantial period of time. 4 It is logical to assume, therefore, that an official who is required to establish a stable residence must bear additional expense in order to set up a suitable home with a view to long-term occupation, whereas no such financial outlay was necessary while the length of his stay 9. In the view of the Court of First Instance, remained uncertain. it is clear from the very wording of Article 5(1) of Annex VII that Mrs Lozano Palacios is also entitled to the installation allowance. Pursuant to that provision, any official who qualifies for the expatriation allowance is entitled ipso iure to the installation allow­ ance, and need not demonstrate that he has been obliged to change his place of residence. Nor, according to the Court of First Instance, given the flat-rate nature of the 11. In its appeal to the Court of Justice, the installation allowance, need the official in Commission challenges the interpretation of question prove that he has had to meet actual Annex VII espoused by the Court of First 3 Instance. In the Commission's view, the leg­ expense. islative context in which Article 5 of Annex VII was introduced suggests the need for a different approach. Article 71 of the Staff Regulations, which refers to Annex VII thereto, provides that an official is to be entitled to 'reimbursement of expenses 10. In the judgment under appeal, the Court incurred by him on taking up appointment'. of First Instance bases its annulment of the Moreover, Section 3 of Annex VII — which decision also on consideration of the purpose contains the provisions governing the instal­ of the installation allowance. After observing lation allowance — is headed 'Reimburse­ that the installation allowance is granted to ment of expenses'. According to the Com­ established officials, not to probationary offi­ mission, this wording confirms that, on a cials — so that, in the majority of cases, offi­ proper construction, Article 5 can only mean cials in receipt of the installation allowance that the installation allowance may be have already settled at their place of employ­ granted solely where a financial outlay has in ment — the Court of First Instance states fact been made or, at the very least, is likely that the installation allowance is specifically to be made. In the present case, since designed to offset the inevitable expenses Mrs Lozano Palacios had been resident in entailed for officials who, on duly becoming Brussels for some time, there is no reason to established, pass in consequence from a pre­ suppose that she would have had to bear any carious status to a stable situation and, expense as a consequence of settling in the accordingly, must become integrated in their place of employment.

12. Before proceeding further, I must make it clear that the arguments put forward by the Commission to justify the partial annul­ ment of the judgment under appeal are, to my mind, less than convincing. In my view, 14. Secondly, I applaud the reasoning of the the Court of First Instance gave correct and Court of First Instance to the effect that the cogent grounds for its decision, both by ref­ passage from a status which was precarious erence to the wording of the provision at — as was that of Mrs Lozano Palacios, by issue, and to the rationale underlying this definition, in that she was a national expert body of rules. on detachment to the Commission — to one which is stable and potentially definitive, fol­ lowing establishment as a Community offi­ cial, must inevitably have given rise to addi­ tional expenses in connection with setting up a suitable home for a long-term stay. It is clear from the combined provisions of Articles 4 and 5 of Annex VII that the instal­ 13. First of all, I cannot but point out that Article 5(1) of Annex VII is framed in lation allowance is designed to cover those extremely clear terms. It provides that the additional expenses even in cases where the installation allowance shall be paid to an official's settlement does not necessarily 5 established official who qualifies for the entail a change of residence. expatriation allowance. Since the Commis­ sion has acknowledged that Mrs Lozano Palacios meets the requirements for payment 5 The expatriation allowance — qualification for which gives of the expatriation allowance, it goes without rise ipso iltre to the right to the installation allowance — is in fact also granted to officials who have lived for less than five saying that she must also be granted the years in the territory of the State in which they enter into service; and also to officials who have lived there for a longer installation allowance. Nor, it seems to me, period, but in the service of another State or an international can that conclusion be invalidated by Article organisation.

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