T-121/97

Court of Auditors of the European Communities, represented by Jean-Marie Stenier, Jan Inghelram and Paolo Giusta, of its Legal Service, acting as Agents, with an address for service in Luxembourg at the seat of the Court of Auditors, 12 Rue Alcide de Gasperi, Kirchberg,

defendant,

supported by

Council of the European Union, represented by Jean-Paul Jacqué and Thérèse Blanchet, of its Legal Service, acting as Agents, with an address for service in Lux- embourg at the office of Alessandro Morbilli, Director-General of the Legal Affairs Directorate of the European Investment Bank, 100 Boulevard Konrad Ade- nauer,

intervener,

* Language of the case: French.

having regard to the written procedure and further to the hearing on 12 May 1998,

gives the following

Judgment

Relevant provisions

1 Article 9(1) of Council Regulation (EEC, Euratom, ECSC) N o 2290/77 of 18 October 1977 determining the emoluments of the members of the Court of Auditors (OJ 1977 L 268, p. 1) provides that 'after ceasing to hold office, members of the Court of Auditors shall be entitled to a pension for life payable from the date when they reached the age of 65 years'.

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6 Article G(6) of the Treaty on European Union, which entered into force on 1 November 1993, conferred on the Court of Auditors the status of Community institution.

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7 O n 10 April 1995 the Council adopted Regulation (EC, Euratom, ECSC) N o 840/95 amending Regulation N o 2290/77 (OJ 1995 L 85, p. 10). The second recital in the preamble to that regulation states that, following the entry into force of the Treaty on European Union, the Court of Auditors became an institution of the European Communities and it therefore seemed desirable to amend the provi- sions of Regulation N o 2290/77. Regulation N o 840/95 entered into force on 20 April 1995 and, in accordance with the second paragraph of Article 3, was to apply from 1 May 1995.

8 Regulation N o 840/95 amends Article 2 of Regulation N o 2290/77 by increasing the basic monthly salary of the President of the Court of Auditors from 108% to 115%, and that of the other members from 104% to 108%, of the basic salary of an official of the European Communities in the last step of Grade A 1.

9 It also amends Article 8 of Regulation N o 2290/77 by increasing the monthly tran- sitional allowance of former members of the Court of Auditors to an amount which varies, depending on the length of service of the member concerned, from 40% to 65% of the basic salary which the member was receiving when he ceased to hold office.

12 For a period of three years after ceasing to hold office, that is to say until February 1997, he received a monthly transitional allowance pursuant to Article 8 of Regula­ tion N o 2290/77.

13 Being entitled to draw his pension from 1 March 1997, he received for the first time, annexed to a letter of 20 February 1997 from the Secretary-General of the Court of Auditors, the slip on which the net amount of his pension was calculated.

14 H e was then able to establish that his pension had been calculated by reference to a basic monthly salary which had been ascertained in accordance with the former version of Article 2 of Regulation N o 2290/77 and was therefore equal to the amount resulting from the application of a percentage of 104% to the basic salary of an official of the European Communities in the last step of Grade A 1.

Procedure and forms of order sought

15 It was in those circumstances that, by application lodged at the Registry of the Court of First Instance on 16 April 1997, the applicant brought this action pursu­ ant to the fourth paragraph of Article 173 of the E C Treaty.

16 By application lodged at the Registry of the Court of First Instance on 29 July 1997, the Council sought leave to intervene in support of the form of order sought by the Court of Auditors. By letter lodged at the Registry of the Court on 12 September 1997, the applicant requested that certain documents annexed to the Court of Auditors' defence be treated as confidential vis-à-vis the Council.

— annul the decision of the Court of Auditors of 20 February 1997 determining his pension with effect from 1 March 1997:

— order the Court of Auditors to pay all the costs.

21 The defendant contends that the Court should:

— dismiss the action as unfounded;

— make an appropriate order as to costs.

22 The intervener supports the form of order sought by the defendant.

24 The applicant raises the question of the meaning of the term 'pensions acquises' in Article 18 of Regulation N o 2290/77 ('existing pensions') and Article 2 of Regula­ tion N o 840/95 ('pensions acquired') which, he asserts, is ambiguous and open to differing interpretations. In his view, it refers to pensions which have actually been determined, thus including those which are already being paid. H e deduces from that interpretation that Regulation N o 840/95 does not apply in his case because the pension awarded to him did not actually begin to be paid until March 1997, thus after that regulation had entered into force. H e adds that if it were necessary to define 'pensions acquises' differently, several possibilities could be envisaged. The pension could be acquired either from the first day of the month following the departure from office or from the end of the three-year period during which former presidents and members of the Court of Auditors receive a monthly tran­ sitional allowance. The applicant also refers to the difference between the English versions of Article 18 of Regulation N o 2290/77 and Article 2 of Regulation N o 840/95. The former refers to existing pensions, which suggests that pensions which are actually being paid are at issue. The latter refers to acquired pensions, corre­ sponding to the French wording which is identical in both regulations, and is just as ambiguous.

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25 The applicant concludes that, since the term 'pensions acquises' is imprecise, it should be given the definition most favourable to him, that is to say the definition under which pensions are acquired only once they are paid. As the applicant's pen- sion was not determined, in the sense that it was not paid, before the date on which Regulation N o 840/95 was first applied, namely 1 May 1995, Article 2 of that regulation does not govern his case.

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29 The intervener has made no observations on the first plea.

Findings of the Court

30 The applicant essentially claims that the term 'pensions acquired' used in Article 2 of Regulation N o 840/95 must be given the meaning most favourable to him. His pension has been paid from 1 March 1997. It is thus in his interest for his pension not to have been acquired, within the meaning of Article 2 of Regulation N o 840/95, until after the date on which that regulation was first applied, that is to say until after 1 May 1995. H e therefore suggests that 'pensions acquired' should be understood as referring to pensions which are actually being paid.

31 The Court finds that the interpretation put forward by the applicant cannot be reconciled with the wording of Regulation N o 2290/77, whose effect is that entitlement to a pension arises, and the pension is therefore acquired, on the day when the member ceases to hold office.

35 It follows that the interpretation put forward by the applicant cannot be upheld.

36 As to the applicant's argument concerning the linguistic divergence between the English versions of, on the one hand, Article 18 of Regulation N o 2290/77 ('exist­ ing pensions') and, on the other, Article 2 of Regulation N o 840/95 ('pensions acquired'), it is sufficient to point out, first, that, according to settled case-law, Community provisions must be interpreted and applied uniformly in the light of the versions existing in the other Community languages (Case C-219/95 Ρ Ferriere Nord ν Commission [1997] E C R I-4411, paragraph 15). The need for a uniform interpretation of the language versions requires, in the case of divergence between them, that the provision in question be interpreted by reference to the purpose and general scheme of the rules of which it forms part (Case C-72/95 Kraaijeveld and Others ν Gedeputeerde Staten van Zuid-Holland [1996] E C R I-5403, paragraph 28). Furthermore, the two terms may be synonymous since a pension entitlement which has been acquired necessarily exists and a pension may exist without being paid. O n the other hand, if the term 'existing pensions' in the English version of

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Article 18 of Regulation N o 2290/77 were to be translated as 'pensions liquidées' ('pensions being paid') instead of 'pensions acquises', it would diverge substantially from the other language versions of the same article, which are also authentic. It follows that that linguistic divergence does not allow Article 18 of Regulation N o 2290/77 to be interpreted as referring to pensions which are being paid rather than pensions which have been acquired.

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without infringing that article, fail to take a decision increasing the rates of acquired pensions if it increases the basic salary. Regulation N o 840/95 offends against the spirit and wording of Article 18 of Regulation N o 2290/77 and fails to have regard to the fact that pensions are generally regarded as an extension of salary.

40 The applicant notes that, on the one hand, Article 1 of Regulation N o 840/95 increases the basic salary and monthly transitional allowance of presidents and members of the Court of Auditors. The only reason given for that increase is the entry into force of the Treaty on European Union, conferring on the Court of Auditors the status of Community institution. O n the other hand, Article 2 of that regulation expressly provides that acquired pensions will not be increased.

41 The applicant submits, first, that no specific reason is set out for the failure of Regulation N o 840/95 to increase acquired pensions. Secondly, the stated reason for the increase in the basic salary and the transitional allowance is purely formal and cannot in itself explain the failure to increase acquired pensions. The increase in the basic salary and transitional allowance without an increase in acquired pen- sions at the same time breaks with the Council's previous consistent practice and infringes Article 18 of Regulation N o 2290/77; there is therefore no valid state- ment of reasons for it.

42 Furthermore, the date on which Regulation N o 840/95 entered into force does not correspond to the date on which the Court of Auditors became an institution within the meaning of Article 4 of the EC Treaty, as amended by Article G(6) of the Treaty on European Union. The Treaty on European Union entered into force on 1 November 1993, thus at a time when the applicant was still in office. There- fore, the reasoning used to justify the increase in the salaries and transitional allowances of presidents and members of the Court of Auditors should also apply to the applicant and, a fortiori, result in an increase in his pension entitlement. There is accordingly a glaring contradiction between the statement of reasons for Regulation N o 840/95 and its effects on the applicant's position.

45 The defendant considers that the reasoning given for Article 2 of Regulation N o 840/95 is correct and sufficient. That reasoning derives, first and foremost, from the fact that Article 2 directly applies a parent provision, namely Article 18 of Regulation N o 2290/77. It derives, secondly and indirectly, from the reason for the increase in salaries, decided upon in Article 1 of Regulation N o 840/95, which resulted from the Court of Auditors' attaining the status of institution. The defen­ dant refers in that regard to the settled case-law according to which the statement of reasons for a regulation may simply set out the general situation which led to its adoption, having regard to the regulation's context (Case 5/67 Beus ν Hauptzol­ lamt München [1968] ECR 83, at p. 95, and Case 80/72 Koninklijke Lassiefab- rieken ν Hoofdproduktschap voor Akkerbouwprodukten [1973] E C R 635).

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46 The intervener draws attention to the particular and exceptional nature of the cir- cumstances which led to the decision to increase the salaries of members of the Court of Auditors. For both the Court of Auditors itself and the Council, the point was to take account of the fact that the Court of Auditors had attained the status of Community institution. It is therefore not an increase of the kind which ordinarily occur by reason, for example, of an increase in an index or a similar circumstance. Indeed, that type of increase is granted to the members of the Court of Auditors simply by reason of an increase in the base for calculating their remu- neration, namely the salary of an official in the last step of Grade A 1.

50 Furthermore, since the Court of Auditors' attaining the status of institution was the only ground for Regulation N o 840/95, it was neither necessary nor justified to state reasons for that regulation other than by the second recital in its preamble. It follows from that change of status that acquired pensions are not affected by the increase. There is therefore no need for a specific reference to it in the preamble.

51 The intervener concludes that the duty to state reasons laid down by Article 190 of the Treaty was fully complied with in this case and that the first limb of the second plea, that Regulation N o 2290/77 was infringed by Article 2 of Regulation N o 840/95, must be rejected as unfounded.

— Findings of the Court

52 In order for Article 18 of Regulation N o 2290/77 to apply, the Council must have decided to increase the basic salary. It is not in dispute that, by Article 1 of Regula­ tion N o 840/95, the Council increased the basic salary of the President and mem­ bers of the Court of Auditors.

53 Furthermore, Regulation N o 840/95 did not repeal Article 18 of Regulation N o 2290/77. Accordingly, when the Council adopted Regulation N o 840/95 it was obliged to comply with Article 18 of Regulation N o 2290/77.

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58 Normally the appropriate increase in the rates of acquired pensions will be the same as the increase in the basic salary. In exceptional cases, and depending on the circumstances, a smaller, or even much smaller, increase in the rates of pensions than in the basic salary may, nevertheless, be appropriate and justified. Very excep-

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tionally, and in the light of highly specific circumstances, an appropriate increase in the rates of acquired pensions may even be nil.

61 By contrast, Regulation N o 840/95 does not contain any recital in its preamble expressly and specifically referring to the failure to increase the rates of acquired pensions.

62 According to the defendant and the intervener, the second recital in the preamble to Regulation N o 840/95 nevertheless constitutes implied reasoning. The reason

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given for increasing the basic monthly salary and the transitional allowance explains, by implication but adequately, the failure to increase the rates of acquired pensions. The reason for both those measures was that the Court of Auditors had become a Community institution. That circumstance upgrades in a certain way the function of members of the Court of Auditors. Conversely, duties performed before then cannot be upgraded in that way. They conclude that, as the pensions constitute remuneration for duties performed under the former system, they can- not be increased.

63 Although that reasoning is implied, it is reasonably sufficient to explain the failure to increase pensions acquired up until the date on which the Court of Auditors became a Community institution, namely 1 November 1993. Members of the Court of Auditors who ceased to hold office before the Treaty on European Union entered into force cannot be considered to have performed their duties for the Court of Auditors as a Community institution.

66 At the hearing, the intervener asserted that the refusal to grant a member such as the applicant an increase in the rate of his pension was justified by the fact that the functions of the Court of Auditors had increased on its becoming a Community institution; in particular, it had the function, laid down by the new second sub­ paragraph of Article 188c(l) of the E C Treaty, of providing the European Parlia­ ment and the Council with a statement of assurance as to the reliability of the accounts and the legality and regularity of the underlying transactions. N e w tasks and responsibilities were thus assigned to its members. Those new functions were not performed in full until a complete financial year had elapsed and the corre­ sponding first statement of assurance had been drawn up. A member who, like the applicant, left office in February 1994 would not therefore have actually been involved in the performance of the new functions. The refusal to give him the ben­ efit of the increase in basic salary granted to members because the Court of Audi­ tors had become an institution was therefore objectively justified.

67 The Court considers, however, that that line of argument — which, moreover, was put forward for the first time at the hearing in reply to a question from the Court and is disputed by the applicant — is invalid in two respects. First, by requiring the Council to adopt, at the same time as a decision increasing the basic salary, a decision making an appropriate increase in the rates of acquired pensions, Article 18 of Regulation N o 2290/77 necessarily requires the Council to consider whether the increase in the rates of acquired pensions is appropriate and, therefore, the reason why an increase in that amount is appropriate, before that decision. In this case, the reason put forward by the Council at the hearing derives neither from the preamble to Regulation N o 840/95 nor from any other document sub­ mitted to the Court, so that it has not been established that it actually guided the

— Arguments of the parties

70 The applicant states that the date on which Regulation N o 840/95 took effect, namely 1 May 1995, is pivotal, in that pensions acquired after that date, unlike pensions acquired before that date, benefit from an increase. That difference in treatment is not based on any objective criterion. The ground put forward by the Council to justify that distinction, namely the fact that the Court of Auditors had

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become an institution of the European Communities, is not an objective criterion related to an increase in basic salaries and monthly transitional allowances. Fur­ thermore, Article 18 of Regulation N o 2290/77 applies irrespective of the reason for the increase in question.

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74 H e considers that the judgment in Case 28/74 Gillet v Commission [1975] E C R 463, relied on by the defendant, is not relevant here. That case was concerned with the alteration of a situation in the future and the ensuing financial consequences. Regulation N o 840/95, on the other hand, introduces different levels of pension for identical services already performed by the President or members of the Court of Auditors in the past. In point of fact, its effect is to lay down different rates of pension for the period from October 1977, when the Court of Auditors was set up, to May 1995. Thus, a member of the Court of Auditors who held office from October 1977 until he acquired a pension in April 1995 receives a lower pension than a colleague who was appointed at the same time, in October 1977, but acquired his pension a week later, in the course of May 1995. The applicant reiter- ates that he was appointed to the Court of Auditors on 18 May 1986 and that he ceased to hold office on 9 February 1994, when the Court of Auditors had just gained the status of Community institution.

75 The applicant further points out that when the Council adopted Regulation N o 840/95, it departed from its customary practice designed to give the increase in the rates of pensions the same retrospective effect as that given to pay. If the rationale for that legislation were, as the Council claims, that the Court of Auditors had become an institution, the adjustment of salaries should have been backdated to December 1993, when he was still in office. Accordingly, the date of 1 May 1995 is not based on any valid objective criterion for determining which persons are entitled to an increase in the rate of their pension.

78 The defendant deduces therefrom that the date on which new legislation enters into force constitutes an objective distinguishing criterion for ascertaining the per- sons to whom it applies. That criterion is considered in the case-law of the Court of Justice to comply with the principle of equal treatment and non-discrimination. The judgment recalls the principle under which difference of treatment arising from the entry into force of a new provision on a particular date cannot amount to unlawful discrimination. Its entry into force is an objective factor, applicable to everybody alike. That conclusion must therefore also apply in the instant case to Regulation N o 840/95 which, from 1 May 1995, freezes the pensions of former members of the Court of Auditors at a given level, calculated on the basis of an amount corresponding to 104% of the salary of an official in the last step of Grade A 1, while the remuneration of current or future members corresponds to 108% of the salary of such an official.

79 In the defendant's view, the opposite solution would render completely meaning- less the principle under which the Community authority, in this case the Council, is entitled at any time to make such amendments to the Staff Regulations as it con- siders to be consistent with the interests of the service.

80 The defendant states that the difference of treatment relied on by the applicant, between the solution adopted for the transitional allowance and that applied to

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pensions, is justified in the light of the principle that a derogation must be inter­ preted strictly. Applying that principle, only pensions should be covered by the specific derogation laid down by Article 2 of Regulation N o 840/95, while the transitional allowance, in the absence of a specific derogation, would be covered by the general system embodied in Article 1. In addition, if the Court were to take the view that the transitional allowance was increased unlawfully, that could not in any event constitute grounds for an increase in pensions as well.

82 The defendant concedes that it is, in accordance with the example cited by the applicant in his reply, theoretically correct that two former members may receive different pensions because one acquired his pension shortly before, and the other shortly after, the new provision entered into force. However, that argument is not relevant. First, the adoption of a general and abstract rule is not discriminatory simply because, in certain borderline cases, some persons to whom it applies may be subject to the drawbacks arising from it (Case 147/79 Hochstrass ν Court of Justice [1980] E C R 3005, paragraph 14). In the instant case, therefore, the example cited by the applicant, which, moreover, does not correspond to his own situation, cannot call into question the validity of the general and abstract measure. Secondly, a difference of treatment does not necessarily entail unequal treatment or discrimi­ nation. In this case, therefore, there is an objective, neutral and abstract distinction, based on the date when the new regulation entered into force.

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83 The defendant also explains what it means by increasing the rates of pensions on a case by case basis. Article 18 of Regulation N o 2290/77 requires the Council to take a specific decision on an appropriate increase in the rates of pensions when­ ever it decides on an increase in the basic salary, that is to say whenever that case arises. That assessment is therefore carried out 'on a case by case basis' because the increase in the rates of pensions can be 'appropriate' only if it specifically relates to the increase made to salaries. Furthermore, it is clear that Article 18 requires an increase in the rates of pensions to be specifically considered if salaries are increased. The increase in the rates of pensions cannot be automatic, as otherwise Article 18 would serve no purpose.

87 According to settled case-law (see, for example, Case T-109/92 Lacruz Bassols ν Court of Justice [1994] ECR-SC II-105, paragraph 87, and Case T-142/95 Delvaux ν Commission [1997] ECR-SC II-1247, paragraph 95), the principle of equality and non-discrimination requires that comparable situations should not be treated dif­ ferently, unless different treatment is objectively justified.

88 In this case, Regulation N o 840/95 introduces a difference in the pension arrange­ ments for former members of the Court of Auditors depending on whether they ceased to hold office, and therefore acquired their pension entitlement, before or after that regulation was first applied on 1 May 1995. The difference lies in the fact that the pension of members w h o ceased to hold office before 1 May 1995 is cal­ culated by reference to a basic salary of 104% of the salary of an official in the last step of Grade A 1, whereas the pension of members who ceased to hold office after 1 May 1995 is calculated by reference to a basic salary of 108% of the salary of such an official.

90 The argument put forward by the intervener at the hearing relating to the fact that the new functions conferred on the Court of Auditors by the Treaty on European Union could not have been performed in full until a complete financial year had ended, when the first statement of assurance was presented (paragraph 66 above), is also intended to demonstrate that the applicant is in a different position, justify­ ing a difference of treatment, from members who ceased to hold office after Regu­ lation N o 840/95 had entered into force. The Court draws attention to its findings in paragraph 67 above and adds that the date from which the different arrange­ ments at issue were introduced, namely 1 May 1995, is both subsequent to the end of the first financial year following the Court of Auditors' becoming an institu­ tion, namely 31 December 1994, and prior to the drawing up of the first statement of assurance, relating to the 1994 financial year, which, according to the explana­ tion given by the defendant's representative at the hearing, was provided in November 1995. In the light of those contradictions, the date of 1 May 1995 does not appear to have been a deliberate choice prompted by the considerations put forward or to reflect those considerations.

91 N o r can the considerations put forward by the intervener at the hearing objec­ tively justify a difference of treatment. Their starting point is a comparison of the position of members of the Court of Auditors in the light of its becoming an insti­ tution. That comparison does not merely link the two objective terms, namely the date on which the Court of Auditors became an institution and the date on which a member ceased to hold office. It additionally takes account of a third factor, namely how long the member held office after the Court of Auditors became an institution. That factor thus brings an assessment of length of service into the com­ parison.

94 T h e defendant and t h e intervener also c o n t e n d in essence that it is well established that different treatment resulting from the entry into force of a new provision on a specific date cannot amount to unlawful discrimination. The provision's entry into force is an objective factor, applicable to everybody alike. The opposite solution would render meaningless the principle under which the Community authority is entitled at any time to make such amendments as it considers to be consistent with the interests of the service.

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95 However, in the first place, that argument fails to take into account that it is con­ ceivable for the date on which new legislation becomes applicable to constitute unlawful discrimination (see, for example, in relation to the discriminatory nature of the date of entry into force of new internal directives, Case T-92/96 Monaco ν Parliament [1997] ECR-SC 11-573, paragraphs 50 to 58).

96 Secondly, the defendant cannot rely, in support of its contention, on the judgments in Gillet and Hochstrass, cited above.

97 The question raised in Gillet related to a regulation adopted in 1972 which estab­ lished, in relation to measures terminating service, different systems of payment for officials in Grade A 1 or A 2 who were recruited under the former Staff Regu­ lations of the European Coal and Steel Community of 1956 and terminated their service under the same conditions, according to whether or not they held one of those two grades when the new Staff Regulations of Officials of the European Coal and Steel Community entered into force on 1 January 1962. The applicant, an offi­ cial who did not fall within that category until after 1 January 1962, claimed, in connection with a plea of illegality, that that regulation was discriminatory. The Court of Justice dismissed that plea.

101 The second judgment relied on by the defendant, that in Hochstrass, cited at para- graph 82 above, admittedly states that 'although in borderline cases fortuitous problems must arise from the introduction of any general ... system of rules, there are no grounds for taking exception to the fact that the legislature has resorted to categorisation' alleged to be discriminatory (paragraph 14). However, the Court immediately goes on to add that that conclusion applies only if the categorisation 'is not in essence discriminatory having regard to the objective which it pursues'.

102 Moreover, care is taken in the judgment to verify that the categorisation under the new legislation (in that case, the introduction of an expatriation allowance granted on the basis of the criterion of nationality) is objectively justified.

103 That judgment therefore cannot do away with the need to check, in reviewing compliance with the principle of non-discrimination, that the differences in arrangements introduced by new rules are objectively justified.

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104 The Court observes, finally, that it is true that the Community legislature is free to make at any time such amendments to staff regulations, in this case Regulation N o 2290/77, as it considers to be consistent with the interests of the service. The fact remains, however, that where that amendment is specifically justified by refer­ ence to a new situation, in this case the attainment by the Court of Auditors of the status of Community institution, and concerns a specified category of persons, in this case members who held office after the Court of Auditors had become an institution, it must treat in the same way those persons falling within the category which is specifically concerned by that new situation.

108 Since the second limb of the present plea, alleging infringement of the principle of equal treatment, is also well founded, there is no need to deal with the applicant's arguments relating to the fact that Regulation No 840/95 increased the transitional allowance without increasing pensions acquired on the date of its entry into force.

109 The action is therefore well founded without it being necessary to analyse the third limb of the present plea, alleging infringement of the principle of the protection of legitimate expectations.

110The contested decision adopted by the defendant, which is founded on Article 2 of Regulation No 840/95, must therefore be annulled.

Costs

1 1 1Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Court of Auditors has been unsuccessful and costs were applied for, it must be ordered to pay the costs.

112 Under the first subparagraph of Article 87(4) of the Rules of Procedure, institu- tions which have intervened are to bear their own costs.

2. Orders the Court of Auditors to pay the costs;

3. Orders the Council to bear its own costs.

Azizi García-Valdecasas Jaeger

Delivered in open court in Luxembourg on 30 September 1998.

H . Jung J. Azizi

Registrar President