C-70/74

JUDGMENT OF 26. 6. 1975 — CASE 70/74 COMMISSION v COUNCIL

CELEX: 61974CJ0070
Datum: 1975-06-26
Källa: eur-lex.europa.eu

THE COURT composed of: R. Lecourt, President, J. Mertens de Wilmars (Rapporteur) and A. J. Mackenzie Stuart, Presidents of Chambers, A. M. Donner, R. Monaco, P. Pescatore, H. Kutscher, M. Sørensen and A. O'Keeffe, Judges, Advocate-General: G. Reischl Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts

The facts and arguments of the parties in the written procedure may be summarized as follows:

I — Facts and procedure

1. Under Article 65 (1) of the Staff Regulations the Council has each year to review the remunerations of the officials and other servants of the Communities in the light of a report by the Commission and to consider whether, as part of economic and social policy of the Communities, remuneration should be adjusted. Particular account has to be taken of any increases in salaries in the public service and the needs of recruitment. Article 65 (2) provides that in the event of a substantial change in the cost of living, the Council shall decide by agreement, within two months, what adjustments should be made to the weightings and if appropriate to apply them retrospectively. At the time of this annual review, account is taken not only of the increase in the cost of living but also of the average increase in purchasing power in the Community, in such a way as to ensure for officials not only the maintenance of their purchasing power but also any increase, in real terms, in their salaries, justified by and parallel to the rise in the general standard of living in the Community. Since, in the absence of a recognized method which would have allowed the variation in the purchasing power to be measured, the determination of the criteria to be taken into account gave rise each year to discussions and difficulties, the Council at its 192nd meeting on 20 and 21 March 1972 adopted a resolution by which it undertook, for a trial period of 3 years from 1 July 1972 to 30 June 1975, to fix the level of increase in Community remuneration within a bracket formed by two indices of the growth of remuneration in the public service in the Member States: a so-called ‘specific’ index reflecting, in respect of a given sample of officials, the growth of the average nominal salary as compared to the increase in the cost of living; and a so-called ‘total emoluments per head’ index in respect of public administrations, as published in national accounts. These two Community indices are fixed on the basis of the weighted average of the data supplied by the corresponding national indices. In this weighting, the Italian figures amount, it seems, to 28 % for the Community of the Six. This same resolution stated moreover that the calculation of the specific index would be made ‘on the basis used until now, but with the following improvements: Better harmonization of the methods of calculation applied by the various national administrations; Apportionment of the various statistical factors into four categories A, B, C and D; Each delegation informing the Commission of the factors of the system of remuneration in the public sector and of every alteration in these factors; The Commission shall be informed of all the details of the calculation of the annual indices of salaries in the public service; In all cases where the Commission has doubts on any factor to be taken into account in the index of salaries in the public service, contact shall take place with the delegations concerned to provide the necessary explanations.’

2. When this system was applied it became apparent that the Community specific index, which showed an average increase of 3.6 % in the purchasing power of national salaries during 1971/1972, showed an increase of 7.3 % during 1972/1973. When the cause of this disparity was sought, it appeared that the Italian specific index had made a considerable leap of 30.4 % from one period to the next, which had had repercussions on the Community specific index. The reason lay in the fact that for the first period the Italian specific index took into account only basic salaries and certain permanent allowances, whereas for the following period, after a change in the financial regulations in the Italian public service made by Decree No 748 of 30 June 1972 and the Law of 15 November 1973, a whole series of additional advantages previously not taken into account were incorporated in the salaries. It appears from the documents and two notes from the Ministero del Tesoro that before 1 December 1972 and 1 January 1973 public officials in Italy enjoyed a whole series of items of remuneration described as ‘allowances, compensation, premiums, vouchers, bonuses, grants and emoluments, however described’ charged on the State budget relating to special public accounts or administration independent of the budget, for work done as officials of the State. All these items of remuneration which contributed to the variation in the purchasing power of remunerations in the Italian public administration and which, for this reason, entered into account in the calculation of the total salary were not taken into account in preparing the specific index, which was limited to taking into account basic salaries and part only of the additional advantages.

3. These findings had at an early stage led the Commission in its proposal to the Council of 9 November 1973 to disregard the Italian specific index in calculating the Community specific index ‘since the Italian specific index had revealed itself as inadequate to show the variation in the purchasing power which occurred in the Italian public service’ by using only the Italian index of the total salary. On this basis it arrived at a bracket of 1.2 % (Community specific index) — 3.2 % (Community index of the total salary) and proposed an increase of salary equivalent to 2.8 %. Since the Council insisted on receiving proposals taking into account the Italian specific index, the Commission agreed and provided a bracket of 7.3 % — 3.2 % and proposed an increase of salaries of 3.5 %. The Council at its meeting on 18 December 1973 accepted an increase of 3.3 % which was implemented with effect from 1 July 1973 by Regulation No 2/74 of 28 December 1973 (OJ L 2 of 3. 1. 1974).

4. In transmitting its amended proposal to the Council by letter of 10 December 1973, the Commission expressed the view that this proposal ‘does not constitute complete compensation for the prejudice caused by the distortions shown by the correction of the Italian specific index’ and asked that note be taken of its intention to submit to the Council proposals ‘to make up for the loss suffered’. At its meeting on 18 December 1973 the Council, while fixing the increase of 3.3 % as stated, expressed the intention of examining any proposals by the Commission with an open mind'.

5. Negotiations followed during which the Council requested and obtained the opinions of Messrs Jean Rey and Raymond Barre, former President and Vice-President of the Commission, and during which the Commission submitted a proposal for a regulation fixing retrospectively a new scale of salaries, first for the period from 1 July 1972 to 30 June 1973 (Arts. 1, 2 and 3) and secondly for the period subsequent to 30 June 1973 (Arts. 4, 5 and 6). At its 229th meeting on 22 and 23 July 1974 the Council refused to accept this proposal and decided to adhere to ‘its decision of 18 December 1973’. On 19 September 1974 the Commission brought an action for the annulment of this decision which was registered at the Court on the same day. After hearing the Advocate-General and the report of the Judge-Rapporteur, the Court decided to open the oral procedure without any preparatory inquiry.

II — Conclusions of the parties

The Commission claims that the Court should:

‘annul the Decision of the Council of 22 and 23 July 1974 relating to the readjustment of the salaries and pensions of officials and other servants of the European Communities’.

The Council claims that the Court should:

‘dismiss the action of the Commission and order it to bear the costs’.

III — Submissions and arguments of the parties

According to the Commission the decision challenged infringed on the one hand Article 65 of the Staff Regulations, which requires the Council to take into account any increases in national salaries in the public service, and on the other hand the rule on the protection of legitimate expectation of the application of Article 65 of the Regulations, as a result of a wrong application of the Decision of 20 and 21 March 1972. This decision, by guaranteeing, in the medium term, that Community salaries should keep pace with those in the national public service, required the Council to fix the annual increases in salaries of officials within a correctly calculated bracket representative of the increase in the purchasing power in the national public administrations, and constituted by the improved Community specific index and the total emoluments per head index. If decisions on annual adjustment of salaries have been taken on the basis of incorrectly calculated specific indices, the rule on the protection of legitimate expectation requires the Council to re-examine these decisions. This is all the more so since the Council has always fixed the increases at the lower limit of the bracket of the two indices.

The decision challenged, which is based on the sole — incorrect — ground that the specific indices have been correctly calculated, is vitiated by illegality and subject to annulment.

In its defence the Council examines in the first place the submission based on the infringement of Article 65 of the Staff Regulations.

It observes in this respect that the sole obligation which it has under this provision is to review the remunerations each year and the conclusions to be drawn from this review are left to its discretion. It is not disputed that it in fact carried out this review in December 1973. This submission must therefore be rejected.

Proceeding then to consideration of the submission based on violation of the rule on the protection of legitimate expectation of the application of Article 65 of the Staff Regulations in that the Council refused to make the necessary adjustments when it appeared that the specific index was vitiated by errors, the defendant claims basically that the specific index does not contain the alleged errors.

In the first place it is indisputable that the new data from Italy given to the Commission at the end of 1973 have been correctly reflected in the Community specific index of 7.3 % and taken into account in the Decision of the Council of 18 December 1973 and in the subsequent regulation of 28 December. The only question which remains in dispute is whether the 1971/1972 specific index used by the regulation of 9 August 1973 for the adjustment of the salaries from 1 July 1972 to 30 June 1973 (OJ L 223 of 11. 8. 1973) was vitiated by error because it was in part based on the Italian index which itself was erroneous.

According to the Council this was not so. The calculation of the Italian index was done correctly and in accordance with the resolution of 20 and 21 March 1972 because this resolution provides that the (Community) specific index has to be drawn up by the statistical office of the European Communities ‘in accordance with the method used until now’ which referred to a report by the Working Party on Staff Regulations of the Council approved on 25 and 27 July 1966 by the Permanent Representatives, according to which, in the application of Article 65 of the Staff Regulations, the concept of ‘salaries’ in the sense of public salaries of Member States must comprise ‘all emoluments in the nature of remuneration which are generally and permanently paid on the basis of fixed rules’.

This definition excludes specific allowances to certain classes of officials, or relating to expenses, and occasional benefits, which precisely describes the data left out of the Italian specific index in 1971/1972. On the other hand, as soon as these same data were included in the salaries following the Italian legislative provisions of 30 June 1972 and 15 November 1973, and as a result generalized and made permanent, they were taken into account in the calculation of the 1972/1973 index. This calculation was thus done each time in accordance with the criteria of the Decision of 20 and 21 March 1972.

The Council recognizes that the Italian specific index was not completely representative of the variations in the purchasing power of salaries in the public service in this State, but such is the case of every index. It is to a certain extent the same as regards the indices of other Member States and it is for this reason moreover that the system created by the resolution of 20 and 21 March 1972 provided for the use of two indices and was adopted only for a trial period of 3 years at the end of which it has to be reviewed.

In criticizing the Community specific index as insufficiently representative, the Commission is in fact criticizing the system established by the Decision of 20 and 21 March 1972 and not the manner in which the Council, as an executive body, applies the system. This criticism cannot be met except by a political decision which would be taken at the end of the trial period.

It was on the basis of such considerations that Mr Raymond Barre, when consulted by the President of the Council, was able to state, rightly, in his report of 14 June 1974 that ‘it is not possible to say that the Italian specific index was vitiated by error before 1973, since until the reform of Law No 734 it could not have been drawn up in any other way’.

The defendant states alternatively that even if the absence of error in the calculation of the specific index was not sufficient to free it from any obligation in respect of the rule on the protection of legitimate expectation, it has nevertheless largely satisfied this obligation.

The lengthy examination of the Commission's proposals, the consultations with Messrs Rey and Barre and the proposal from the office of the President of the Council, following the opinion by Mr Barre, to add ‘on grounds of equity’ 2 % to the total increase of 3.3 % fixed on 18 December 1973, a proposal rejected by the Council on 23 July 1974, showed that the Council had fulfilled the obligation to reconsider the matter arising from the rule on the protection of legitimate expectation.

It is not possible to go farther and interpret the rule on the protection of legitimate expectation as imposing on the defendant the obligation retrospectively to substitute an index regarded as more representative for the index considered defective, for this would be greatly to exceed the intentions which the Council had in issuing its Decision of 20 and 21 March 1972.

The reasoning of the Court of Justice in the judgment of 5 June 1973 (Case 81/72, Commission v Council [1973] ECR 575) is based on the intention of the Council to be bound to observe specific criteria in the application of Article 65 of the Staff Regulations. When specifying the trial nature of the system and indicating that it would reconsider the matter after it had been tried for 3 years, the Council could not have had the intention at the same time of correcting the system during the trial period each time an ‘improvement’ in the representative character of the indices appeared possible. The argument put forward by the Commission means reducing to practically nothing the discretion which the judgment of the Court recognized the Council as having.

Finally the Council states that the fact that it has always fixed the increase ‘at the bottom of the bracket’ cannot be held against it in view of its discretion.

In its reply the Commission states that it agrees with the Council when the Council says that the question in dispute is whether and to what extent the index used has had regard to the rule laid down in the Decision of 20 and 21 March 1972. It does not challenge either the discretion given to the Council by Article 65 of the Staff Regulations or the trial nature of the method worked out in the Decision of 20 and 21 March 1972.

The obligation which the Commission says the Council has disregarded is the obligation to take account of the effective increases in salaries in the Member States. Since this relates to a finding of fact, there is no place for the exercise of discretion. The Council is bound by the obligation to take account of an actual fact, and if it fails to do so its decision is vitiated by illegality. If the calculation of the increases in Member States was defective, the Commission should re-examine the facts on which its decision was based and take the necessary steps to adjust the salaries.

This said, the Commission recognizes that it remains to be established whether the increases in the fringe benefits should be taken into account in the calculation of the specific index.

After having analysed the report of Mr Barre and having stressed that the latter recognized that it was beyond dispute that the Italian specific index had not in the past reflected the actual variation in the salaries of the Italian public service, the applicant states in this respect that it would be incorrect to say that the Decision of 20 and 21 March 1972 implies that account must be taken only of allowances received by all officials (criterion of generality) which are not of an occasional nature (criterion of permanence). The Report R/468/66 of the Council's Working Party on Staff Regulations of 17 May 1966, according to which the concept of ‘salaries’ comprises all emoluments in the nature of remuneration which are generally and permanently paid on the basis of fixed rules, stated that this only laid down a method of working for the purpose of reviewing the variation in public salaries' and that it could not prevent committees ‘from taking into account, where appropriate, factors other than those referred to in the said method’.

The applicant considers, therefore, that even before the Decision of 20 and 21 March 1972 a total representing 30 % of the purchasing power of public salaries of a Member State could not have been left out of the calculation of the variation in national public salaries, since it must at the very least be regarded as an ‘other factor’.

Further, even if the system of 1966 had been based exclusively on emoluments of a general permanent nature, it would have been more correct to interpret the criterion of generality as referring to the average amount of the total of these emoluments received by each national official. The result obtained would indeed have been much nearer to reality since the constant disparity between the specific index and the total emoluments index shows that for several years the Member State in question has caused the variation in the purchasing power in the public service to be reflected through the fringe benefits rather than the basic salary.

Moreover the object of the Decision of 20 and 21 March 1972 was to develop the system in relation to what it was previously, for it had been the tendency of the Council to take into account only the basic emoluments of the national salaries which was at the origin of the tensions between the institutions and the staff. It is for this reason that the former heading ‘variation in public salaries’ became ‘variation in the purchasing power of remuneration’ and that an obligation was introduced requiring each delegation to inform the Commission of the factors in the system of remuneration of its public service and of every alteration in these factors for the purpose of improving the calculation of the index of the variation of public salaries in the Member States in relation to the method used until then. The introduction of a new index for checking, that is the total emoluments per head index which in turn measures the average variation in remuneration as a whole, likewise shows the desire not to neglect increases found in fringe benefits.

Finding that for two consecutive years the annual decisions adjusting the remuneration of officials and other servants of the Communities had been taken on the basis of indices which had been incorrectly calculated resulting in an overestimate of the Italian data for 1973 and an underestimate for 1972, the Council should, according to the Commission, readjust the remuneration for the periods in question on the basis of corrected indices.

The Commission joins issue with the Council's argument that the information given to the Working Party on Staff Regulations by the Italian delegation shows that the 30.4 % increase in the Italian index for 1973 is 55 % due to the effects of ‘restructuring’ the Italian public service and 44 % to the increase in the cost of living and to the introduction of the new equalization allowance, an apportionment which the Council itself admitted that it had been impossible to verify. The rate of 30.4 % does in fact reflect the real variation in the purchasing power of Italian public salaries, for the increase in the cost of living has already been deducted.

The Commission concludes by stating that the fact that the Council had always fixed the increases at the lower limit of the bracket of the two indices, showed its constant tendency to depart from the spirit of the compromise recognized in the Decision of 20 and 21 March 1972 as well as the objectives which it had sought to achieve.

In its rejoinder the Council states that it is due to the definition of the concept of ‘public salaries’, given by the document of 17 May 1966 worked out by the Council's Working Party on Staff Regulations and approved by the Committee of Permanent Representatives that the Italian bonuses in question were not taken into account in the Italian specific index prior to the reform of the system of remuneration of Italian officials.

The Council states that the paragraph of this document to which the Commission refers and according to which ‘other factors’ may be taken into account, simply shows that the Council recognized a certain discretion on the part of the Commission with regard to the grounds of its proposals. It had certainly not intended to bind itself in advance beyond what was expressly stated in the document.

The Commission's claim that an amount representing some 30 % of the purchasing power of public salaries of a Member State cannot be left out of account in calculating the variation of national public salaries implicitly brings in questions of morality and does not constitute legal proof relating to the central question of whether a certain definition of the concept of public salary has or has not been observed in the calculation of the specific index. For the period prior to the Decision of 20 and 21 March 1972 the non-inclusion in the Italian index of casual allowances was undoubtedly in accordance with the restriction of ‘public salaries’ to ‘general and permanent’ remuneration.

The Council denies that the Decision of 20 and 21 March 1972 substituted for this restricted concept a wide concept of ‘purchasing power’. The amendments to which the Commission refers do not support such an argument. The obligation on each delegation to inform the Commission does not in any way imply an undertaking by the Council to take account of all the items of remuneration notified to the Commission. Further, no conclusion may be drawn from the introduction of the total emoluments per head index, the basis of which may be very different since the Council must fix the increase in salaries within the bracket constituted by these two indices.

As for the amendment of the heading ‘variation in public salaries’ to ‘variation in the purchasing power of salaries’, this shows only that in future the annual decision of the Council is to be based not only on the specific index of public salaries, but also on the total emoluments index, the basis of which is wider.

The Commission is thus in error in taking a part for the whole when it claims that the specific index should alone show the variation in the purchasing power.

Finally, the Council rejects the argument that it had taken its decision without having recourse to the necessary explanations. Having examined the file for more than six months, having called upon two experts and having established that the index had been correcty calculated, an analysis of the details of the reasons for the increase of 30.4 % would have been irrelevant.

The Council stresses once again the importance of the distinction to be made between error in the application of the rule, which would affect the validity of the decision, and the imperfection inherent in the system selected, which cannot be remedied until the end of the trial period.

At the conclusion of the written procedure the Court put several questions to the parties, who replied in writing and at the hearing on 30 April 1975.

The first question asked whether the parties did or did not agree that the defect claimed in the specific index would not affect the determination of the salaries for the period 1973/1974 since a correction of the index could only reduce the specific index from 7.3 to a lower figure. What then was the purpose of the action with regard to this period?

In its reply the Council considers that there is no object in the Commission bringing an action against the Council's decision relating to the adjustment of the salaries for 1973/1974.

In answer the Commission says that the object of the action is not the correction of the specific indices relating to the determination of the salaries for 1972/1973 and 1973/1974, but the annulment of the Decision of the Council of 22/23 July 1974 in so far as it is based on the sole and incorrect ground that the said indices conform with the rules laid down in the Decisions of 20/21 March 1972. The Commission has an interest in having a finding that the index of 7.3 % is inaccurate in order to challenge the Council's claim that the same specific index for 1972/1973 had been correctly calculated. The Commission admits however that a reduction of the index from 7.3 % to a lower figure would not necessarily bring into question the increase of 3.3 % decided on 18 December 1973.

A second question by the Court asks the Commission to state the items of casual remuneration left out of account in the calculation of the Italian specific index before the reform introduced by the Decree of the President of the Republic No 748 of 30 June 1972 and the Law No 734 of 15 November 1973 and which are included as a consequence of this reform. In reply to this question the Commission refers to the difficulties of identifying, in the legislation now in force, the items of remuneration and the fringe benefits which have been included in the calculation of the specific index. For this reason it has supplied the Court with a list, based on the Italian budget, of the classes of fringe benefits paid in the various Italian ministries before the reform.

The Advocate-General delivered his opinion on 28 May 1975.

Law

1. The purpose of the action is the annulment of the Decision of the Council contained in the minutes of its meeting on 22 and 23 July 1974 on the level of salaries of officials and other servants of the Communities insofar as the Council decided, in respect of the salary periods from 1 July 1972 to 30 June 1973 and from 1 July 1973 to 30 June 1974, not to adjust the said salaries previously fixed by Regulations No 2188/73 of the Council of 9 August 1973 (OJ L 223 of 11. 8. 1973) and 2/74 of the Council of 28 December 1973 (OJ L 2 of 3. 1. 1974).

2. The applicant claims that by refusing to adjust these salaries notwithstanding the defectiveness which affected the annual specific indices employed in fixing them, the Council infringed both Article 65 of the Staff Regulations and Conditions of Employment of other servants of the Communities and the rule of legitimate confidence that officials and other servants could have in the application of the Decision previously taken by the Council on 20 and 21 March 1972.

3. Under the second paragraph of Article 65 (1) of the Staff Regulations the Council has to consider during the annual review of the remunerations of the officials and other servants of the Communities whether, as part of economic and social policy of the Communities, remuneration should be adjusted, taking particular account of any increases in salaries in the public service and the needs of recruitment.

4. It is admitted that these adjustments must seek not only to adjust salaries in relation to the increase in the cost of living, but also to give officials and servants the benefits of the increase in the level of incomes recorded in the Community.

5. Under the first paragraph of Article 65 (1) this review has to take place on the basis of a joint index prepared by the Statistical Office of the European Communities in agreement with the national statistical offices of the Member States.

6. Until 1972 a Community specific index was used for this purpose, prepared according to a weighted average, on the basis of national specific indices which were required to reflect, in respect of a particular sample of officials, the alteration of the average nominal salary in relation to the increase in the cost of living.

7. For the purpose of eliminating the differences of view caused by this review, in particular as regards the measure of the increase in the purchasing power of national salaries, the Council on 20 and 21 March 1972 adopted a ‘system of adjustment of salaries’ in which it undertook, for a trial period of 3 years from 1 July 1972 to 30 June 1975, to fix the level of increase in Community remuneration within a bracket formed on the one hand by the specific index already previously used, but improved, and on the other hand by an index called ‘total emoluments per head in public administration’, as published in national accounts, which index had to reflect the variation in the total salary and other benefits afforded to the national officials in each Member State.

8. For the 1972-1973 salary period the Council, on the basis of a specific index of 3.6 % and a total emoluments index of 3.9 % issued by the Statistical Office of the European Communities, fixed the increase in salaries at 3.65 %.

9. For the 1973-1974 salary period, on the basis of a specific index 7.3 % and a total emoluments index of 3.2 %, the Council fixed the increase at 3.3 %.

10. In seeking the reasons for the sudden increase from one year to the next of the Community specific index, the Commission found that the Italian specific index, from one period to the next, had made a leap of some 30 % which was reflected in the Community specific index.

11. This sudden increase was due to the fact that as regards the first period the Italian specific index took account only of basic salaries and certain general and permanent allowances, to the exclusion of a whole series of additional advantages of a specific nature and relating to special public accounts or administration independent of the budget, but from which large categories of officials benefited, whereas for the following period, as a result of a reform and restructuring of the system of salaries in the Italian public service resulting from a Decree of 30 June 1972 and a Law of 15 November 1973, these additional advantages had to a large extent been included in the salaries.

12. It appears that the level of salaries in the Italian public service before the above reform was attributable, to an extent disputed by the parties but not inconsiderable, to these additional items.

13. The Commission infers that the total of casual remuneration which, according to the Commission, represents an average amount of 30 % of the basic salaries, should have been taken into account before the 1972-1973 reform in preparing the Italian specific index and hence in preparing the Community specific index.

14. Such correction would mean a reduction in the specific index (7.3) used to fix the level of salaries from 1 July 1973 but an increase in the specific index (3.6) used for the level of remuneration as from 1 July 1972.

15. According to the applicant this correction does not affect the level of remuneration for the 1973/1974 salary period but must lead to an adjustment for the 1972/1973 period.

16. On being informed of these items to be appraised, the Council undertook on 18 December 1973, at the time when it was fixing the salary for the 1973/1974 period, to ‘consider with an open mind’ the proposals which the Commission intended to put to it in this respect.

17. However, by the decision challenged the Council decided not to undertake the correction proposed by the Commission.

18. The action raises the question whether the facts cited by the Commission vitiated the specific index by reason of error so that its maintenance would constitute an infringement of Article 65 of the Staff Regulations and would violate the rule of legitimate confidence which the officials concerned may have in the correct application by the Council of its Decision of 20 and 21 March 1972.

19. These two pleas are related and it is proper to deal with them together.

20. By its Decision of 20 and 21 March 1972 the Council intended for the implementation of Article 65 to bind itself for a definite period to observe fixed criteria, in particular by undertaking to fix the increase in salaries in relation to the increase in the purchasing power of national salaries within the bracket formed by the two abovementioned indices.

21. This system was recognized by the Court of Justice in its judgment of 5 June 1973 in Case 81/72 Commission v Council [1973] ECR 575 as constituting a legal method of the exercise by the Council of the discretion which Article 65 gives it and as committing the institution for the period which it has laid down.

22. The Commission is therefore right in maintaining that the Council cannot, to escape this obligation, plead this discretion, the exercise of which it has itself determined.

23. Thus, as has been recognized by the two parties, it must be determined whether, and if so to what extent, the specific index used observed the rule laid down by the Decision of the Council of 20 and 21 March 1972.

24. This decision provides that the index shall be constituted by the ‘index of the variation of public salaries in Member States during the past year prepared by the Statistical Office of the European Communities in accordance with the method used until now, but with certain improvements’.

25. This method had previously been fixed by the Council's Working Party on Staff Regulations in a report approved by the Committee of Permanent Representatives at its meeting on 25-27 July 1966.

26. According to this report the concept of salaries ‘should take account of all emoluments in the nature of remuneration which are generally and permanently paid on the basis of fixed rules’.

27. The improvements envisaged by the Decision of 20 and 21 March 1972 have as their object an improved harmonization of the calculating methods applied by the various national administrations and to ensure that the Commission is more completely informed, but do not bring into question the basis of the method previously laid down.

28. No doubt this same report provided for the possibility of the Commission putting forward, where appropriate, factors for consideration other than those resulting from the method adopted, but it left the Council free with regard to taking them into account.

29. Moreover it is the, in the Commission's opinion, restrictive interpretation which the Council gives to the concept of ‘salaries’, and not the refusal to take into account ‘other factors’, which are not specified, to which the Commission objects.

30. The Commission wrongly interprets the phrase ‘generally … paid’ as referring to the ‘average amount of the total of these emoluments received by each national official’.

31. It was for the purpose of reflecting this total, and to correct where necessary the unrepresentative character of the specific index, that the total emoluments index was adopted alongside the specific index.

32. The criteria of generality and permanence of the salaries and allowances to be taken into account in the specific index mean on the contrary that only emoluments paid regularly and on a legal basis or under fixed rules to all public officials should be included in this index.

33. It was thus on a strict interpretation of the Decision of the Council of 20 and 21 March 1972 that the Italian specific index was calculated without taking into account the additional factors in the public remuneration in respect of the period when these factors had not yet been included in the salaries.

34. It appears moreover from the documents supplied by the Commission that these allowances, grants, vouchers and other benefits in addition to the salaries represented, depending on the administrations which made them, a percentage varying from 11 to 49 % and amounting in one case even to 92 % of the basic salary.

35. Their incorporation, by the expedient of a mean, in a specific index, the object of which is precisely to reflect the variation of one of more particular samples among the careers in the public service, was thus to be viewed with reserve and in any event could not in any sense be regarded as constituting the sole correct interpretation of the concept of specific index.

36. No doubt in so far as the adjustment of salaries in the Italian public service is done by casual allowances rather than by basic salaries, the specific index does not completely reflect — but to an unascertainable extent since it varies from one administration to another — the increase in the purchasing power which Italian officials enjoyed.

37. However, the fact should not be lost sight of that the joint index referred to in Article 65 of the Staff Regulations has not since 1972 been constituted only by the specific index.

38. On the contrary, the main factor in the Decision of 20 and 21 March 1972 consists of conceiving this joint index as formed by a bracket of two indices, the second of which, the total emoluments per head index, has precisely the caracteristic of taking into account all the factors constituting, either as basic or additional, the total remuneration which officials in the public service in the Member States enjoy.

39. Thus the necessarily relative nature, on account of the complexity and diversity of the national systems, of one of the indices is to a certain extent corrected by the other, and it is from their joint implementation that the sufficiently representative nature of the joint index must result.

40. In this respect the Commission states that the Council has on two occasions since 21 March 1972 adhered very closely to the lower index.

41. If in a permanent system of adjustment of salaries in which the measure of the variation in national salaries is considered as resulting from the joint consideration of two indices, the Council systematically and without valid reason adopts the lower index, it would be disregarding an essential factor in the system to which it had intended to commit itself.

42. However, in the present case the Council has expressly stressed in its Decision of 20 and 21 March 1972 that it was a question of a system of appraisal adopted on a trial basis for a period of 3 years, the validity of which would during the third year be the subject of a thorough review for the purpose of making the structural alterations which prove necessary.

43. In these circumstances its decision during the two periods in question to adopt the lower index cannot be regarded as being wrong and does not justify a revision of the calculation of the specific indices.

44. It follows from the foregoing considerations that the calculation of the Community specific index in respect of the periods in question has been done in accordance with the criteria laid down in the Decision of 20 and 21 March 1972.

45. Further, it has not been established that the joint index of salaries referred to in Article 65 of the Staff Regulations resulting from the joint use of the two indices provided for by this decision is so unrepresentative as to make it incompatible with the said article.

46. The action must therefore be dismissed.

Costs

47. Article .9 (2) of the Rules of Procedure provides that the unsuccessful party shall be ordered to pay the costs.

48. The applicant has failed in its submissions.

On those grounds, THE COURT hereby:

1 Dismisses the action as unfounded;

2 Orders the applicant to pay the costs.