JUDGMENT OF 4. 2. 1982 — CASE 817/79 BUYL v COMMISSION
In Case 817/79
THE COURT (First Chamber) composed of: G. Bosco, President of Chamber, A. O'Keeffe and T. Koopmans, Judges, Advocate General: F. Capotorti Registrar: J. A. Pompe, Deputy Registrar
gives the following
JUDGMENT
Facts and Issues
The facts of the case and the conclusions, submissions and arguments of the parties put forward during the written procedure may be summarized as follows :
I — Facts and procedure
1. Background provisions
This case should be seen against the background of the following provisions:
a) In the version in force until 31 March 1979 Article 63 of the Staff Regulations of Officials provided that: In accordance with Article 17 of Annex VII to the Staff Regulations an official may have part of his emoluments transferred either regularly or on an exceptional basis to a country other than that in which he performs his duties. Until 31 March 1979 Article 17(4) provided that such transfers were to be made through the institution to which the official belonged “at the official ruling exchange rate on the date of transfer”. The “official exchange rate” within the meaning of that provision was the last parity accepted by the International Monetary Fund, which had not been altered since 1 November 1969 (for example, BFR 13.66 = DM 1). After the collapse in 1971 of the international system of fixed exchange rates, which is at the heart of those provisions, the parities came to reflect less and less the purchasing power of the currencies involved and their value on the international money market. Officials who had transfers made to countries the value of whose currency had increased in relation to above the parities notified to the International Monetary Fund were thus able to realize gains on the exchange rate, as compared with transfers made in normal market conditions. In accordance with the legal position existing prior to 1 April 1979 the weighting provided for in Article 64 of the Staff Regulations to reflect the living standards at the place where the official performed his duties had to be applied to the whole of the remuneration, including the part to be transferred to another country pursuant to Article 17 of Annex VII. This led to an increase in the weighting for officials assigned to countries such as Italy, the United Kingdom and Ireland, where the value of the currency had decreased in relation to the parities notified to the International Monetary Fund, and to a reduction in the weighting for officials assigned to countries whose currency had gained in value in relation to the parities of the Fund. Pensioners were able to derive special advantages from these provisions. If they declared their domicile to be in a country whose currency had diminished in value, the weighting in respect of that country was applied to their pension in accordance with Article 82(1) of the Staff Regulations. Article 45 of Annex VIII to the Staff Regulations gave them the opportunity of having their pensions paid in the strong currency of their country of origin or of that of the seat of the institution to which they belonged. This state of affairs was condemned by Mr Advocate General Mayras in his opinion in Case 28/79 Gillet [1975] ECR 475. In 1974 the Commission submitted proposals to the Council with a view to abolishing the anomalies in the rules governing the payment of remuneration and pensions brought about by the break-down in the international system of fixed exchange rates. The proposal for a Council regulation amending the Staff Regulations of Officials, submitted to the Council by the Commission on 13 June 1974 (Official Journal 1974 C 88, p. 25) provided for an amended version of Article 17(4) of Annex VII to the Staff Regulations: On 1 April 1977 the Commission submitted to the Council a proposal for a Council regulation introducing the European Unit of Account (EUA) into the Staff Regulations (Official Journal 1977 C 99, p. 5). That proposal was rejected by the Staff Regulations Committee, to which it had been referred. The Council obtained the opinion of the European Parliament and of the Court of Justice. By resolution of 7 July 1977 (Official Journal C 183, p. 55), the Parliament approved the proposal taking note of “the Commission's assurance that its proposal will in no way affect the real value of the payments made to officials in the form of remuneration, pension and allowances”. At the sitting, the Member of the Commission responsible for administration, Mr Tugendhat, stated: “The object of the Commission's system is financial neutrality, and what we think that our system can achieve is an equality of purchasing power. What we want is that a Commission official of a given grade, whether he is working in Brussels or Luxembourg or London or any other part of the Community, should be able to buy exactly the same quantity of goods as his equal in another part of the Community ... The problem of transfers is also one that has preoccupied the Commission. There is a proposal for an amendment of the Staff Regulations now under consideration. In our view, that amendment must be adopted no later than the present draft regulation, and that, I think, covers another point about which there has been concern.” The Council did not succeed in 1978 in adopting the regulation proposed by the Commission on 6 October 1976 (Official Journal C 271, p. 5) “on the procedure for applying the European Unit of Account (EUA) to the legal acts adopted by the institutions of the European Communities”. The Commission therefore set to work to bring up to date, in the light of the situation thereby created, the exchange rates in respect of remuneration for officials which was envisaged by the proposal of 1 April 1977. In an annex to its Report in 1978 on the yearly survey of the level of remuneration (Doc. COM (78) 6735 final of 29 November 1978), the Commission sent the following communication to the Council on which neither the Parliament, the Court of Justice or the Staff Regulations Committee was consulted:
“An official's remuneration shall be expressed in Belgian francs. It shall be paid in the currency of the country in which the official performs his duties. Remuneration paid in a currency other than Belgian francs shall be calculated on the basis of the par values accepted by the International Monetary Fund, and in force on 1 January 1965.”
“Transfers provided for in paragraphs (2) and (3) shall be made on the basis of the par values referred to in the last paragraph of Article 63 of the Staff Regulations; the amounts transferred shall be multiplied by a coefficient representing the difference between the weighting for the country in whose currency the transfer is made and the weighting for the country in which the official is employed.”
“... The first two paragraphs of Article 63 are replaced by the following:
‘Officials’ remuneration shall be expressed in Belgian francs. It shall be paid in the currency of the country in which the official performs his duties. Remuneration paid in a currency other than Belgian francs shall be calculated on the basis of the exchange rates used for the implementation of the general budget of the European Communities on ...
The Commission urges the Council to adopt the aforementioned article before the end of the year as well as Article 17 of Annex VII which is the result of the Council's studies relating to the amendment of the Staff Regulations ...
The ... regulation should come into effect on 1 January 1979, and should apply from 1 April 1979. However, for pensioners in respect of allowances whose net financial benefits will be less than those under the existing arrangement, the regulation will apply only from 1 October 1979 ...”
b) On 21 December 1978, the Council adopted Regulation No 3085/78 (Official Journal L 369, p. 6) amending, with particular reference to the monetary parities to be used, Regulation No 259/68 laying down the Staff Regulations of Officials of the European Communities and the Conditions of Employment of Other Servants of the Communities, Regulation No 2530/72 and Regulation No 1543/73 concerning certain special measures. The regulation embodies the wording of the communication from the Commission of 29 November 1978 and also the formula contained in the proposal of 1 April 1977 concerning the weighting to be applied to amounts transferred. The Council added however: “From that date the difference between the net amounts resulting from the implementation of the regulation and those received in September 1979 should be reduced by 1/10 per month.” The regulation fixes 1 July 1978 as the relevant date for calculating remuneration paid in a currency other than Belgian francs on the basis of the exchange rates used for the implementation of the general budget of the Communities and goes on to state that that date shall be changed at the time of the annual review of remuneration.
c) Hand in hand with the bringing up to date of the exchange rates, the Council adopted Regulation No 3086/78 of 21 December 1978 (Official Journal L 369, p. 8) adjusting the weightings applicable to the remuneration and pensions of Officials and Other Servants of the European Communities following the amendment of the provisions of the Staff Regulations concerning the monetary parities to be used in implementing the Staff Regulations, which amended the value of the weighting according to the various places of employment, in such a way that every official or temporary employee employed elsewhere than in Belgium or Luxembourg received the same level of remuneration in April 1979 as his remuneration for the preceding month. Since the point of departure — the amount of the remuneration in Belgian francs — remained in effect ex hypothesi the same, as regards payment transactions, and the end of the procedure — the amount of the payment in national currency — ought itself normally to remain the same, therefore as soon as one of the parameters of payment, for example the exchange rate, was altered it was then necessary to adjust the second parameter (weighting) in such a way as to ensure the neutrality of the transaction.
2. Facts and procedure
The applicants complain that as from April 1979 transfers made at their request through the institution, either in German marks or in guilders, in accordance with Article 17 of Annex VII, have become more expensive. According to the applicants, the increased cost is between 1.5% and 10.41 %. For the same transfer of DM 1000 made on behalf of an official employed in Belgium, for which in March 1979 the exchange rate at the old rates of exchange, was BFR 13660, which was deducted from the remuneration actually paid in March to the person concerned in Belgium, in April the exchange value was BFR 15968, on the basis ofıthe new rates of exchange provided for in Article 63 of the Staff Regulations (BFR 100 = DM 6.3452) and of the adjustment resulting from application of the weighting 0.987, corresponding to the ratio between the new weighting for Germany (98.7) and the new weighting for Belgium (100). Thus, for the same transfer of DM 1000, a deduction of BFR 15968 (BFR. 2308 more than the previous deduction) was made from the remuneration paid to the person concerned at his place of employment for the month of April.
On 25 and 27 June 1979 the applicants submitted complaints to the defendant set out in the same terms.
The defendant replied to the applicants on 28 September 1979.
This application, dated 17 December 1979, was registered at the Court on that date.
On hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court (First Chamber) decided to open the oral procedure without any preparatory inquiry.
II — Conclusions of the parties
The applicants claim that the Court should declare:
That this application is admissible and was lodged in due time;
That this application is justified and consequently declare:
That the decisions determining salaries applicable to the month of April 1979 are illegal and therefore inapplicable for the reasons set out in this application; annul the rejections of the complaints;
Consequently declare that the decisions are null and void and incapable of having effect as regards the future;
Order the Commission to pay to the applicants from and including the month of April 1979 until the delivery of judgment the difference between the amounts to which they were entitled on the basis of the former provisions and the amounts actually paid on the basis of Regulation No 3085/78;
Order it in addition to pay them interest at 6% for the arrears due as from the various dates on which they fell due;
Order the Commission to pay the costs of the proceedings.
The Commission claims that the Court should:
Dismiss the application as unfounded;
Order the applicants to pay the costs.
III — Submissions and arguments of the parties
1. In their application, the applicants state in the first place that essential procedural requirements, as provided for in Article 10 of the Staff Regulations, have not been met. In fact, when it realized that the future system could not be based on the European Unit of Account but was to be linked to the updated rate adopted for the general budget of the Communities, the appointing authority should have reopened the matter and placed it before the authorities and bodies which had to give their opinion. This was not done and the Commission itself acknowledges, in its reply to the complaints, that the amendment was made in a way which departed slightly from the prescribed procedures. The fact that the Council reached a unanimous decision makes no difference. The Commission itself should in any case have submitted the new proposal based on the rate applicable to the budget to the Council. The applicants also claim that there has been a failure to protect their legitimate expectations. As regards the Parliament, it has been led into error since it took note of the assurances given by the Commission to the effect that the latter's proposals would in no way affect the real values of the payments made to officials. The Parliament thus relied upon the formal undertaking given to it by an “authorized person”. The applicants' view is that the institutions' discretion is itself subject to certain restrictions by virtue of the principle of restricted authority. By decreasing the “real values”, despite the fact that a formal undertaking had been given to maintain them, the institutions breached that principle. By deciding on new exchange rates for transfers, the Council moreover misused its powers. Rights validly acquired by the applicants under the former provisions of Article 16 of Annex VII have not been respected. Moreover, there has been discrimiıation and unequal treatment as between serving officials and those in retirement.
2. In its defence, the Commission observes with regard to the infringement of essential procedural requirements, that the applicants' view would be well founded if, after a first proposal from the Commission was put forward and before the Council adopted any decision on it, a quite new proposal was submitted, that is to say one concerning other matters or making substantial amendments (cf. a contrario Case 41/69 ACF Chemiefarma [1970] ECR 661). In the same way, the consultation procedure provided for in Article 10 of the Staff Regulations does not have to be repeated every time a minor alteration is made. In this case, by a communication of 30 November 1978 the Commission informed the Council of its desire that Article 1 of the initial proposal of April 1977 be re-worded. A comparison with the last-mentioned text shows clearly that the new provisions do not amount to a substantial amendment. The nub of the amendment to the Staff Regulations is merely the abandonment of the old IMF parities and replacement of them by updated parities whereby every official is still entitled to the same total remuneration in the currency of the place of his employment. They would have been the result obtained if the rates had been updated by application of the European Unit of Account. This is in fact the result obtained by the updating of the rates under the procedure finally adopted. In the case of transfers, updating on the basis of the European Unit of Account of the exchage rates to be applied to such transactions involved an increase in the cost thereof to an extent equivalent to that resulting from the application of Regulation No 3085/78. In fact, the exchange rates used for implementation of the general budget of the Communities as at 1 July 1978 were strictly related to the value of the currencies considered (Belgian franc on the one hand, other currencies on the other) with respect to the European Unit of Account on the same date. As regards the breach of general principles, the defendant considers that the applicants' criticisms are totally without foundation. The applicants educe from the concept of “vested rights” an opinion contrary to the case-law of the Court (cf. Case 28/74 cited above in which it was held that “an official cannot in any case claim a vested right unless the facts giving rise to that right arose under a particular set of Staff Regulations prior to the amendment decided upon by the Community authority”). That ruling is the logical consequence of the view that the official's relationship is governed not by contract but by regulations (cf. opinion of Mr Advocate General Gand in Case 20/68 Pasetti-Bombardella [1969] ECR 235, at p. 250). It forms the corollary of the principle that administrative measures must not be retroactive. The “advantages lawfully acquired” by the applicants are fully safeguarded as regards the favourable exchange conditions granted in respect of transfers made on or before 1 April 1979. On the other hand, it is no longer possible to speak of a “vested right” to have those same favourable conditions maintained in force when the event giving rise to the right to make transfers arose after the Staff Regulations were amended. Before the rule of protection of legitimate expectation may be relied upon, the authority concerned must have entered into commitments, that is to say “assumed obligations which it has bound itself to observe” (cf. Case 81/72 Commission v Council [1973] ECR 575). At no time, and in particular since they entered the service, has the defendant given the applicants an undertaking not to change the conditions of the Staff Regulations governing the employment relationship, in particular as far as the detailed arrangements for transfers are concerned. Moreover, it could not have validly given such an undertaking, in vieı of the fact that the contract of service and the rights and duties flowing therefrom are governed by regulations. It is thus pointless for the applicant to maintain that the draftsmen of the Staff Regulations intended to introduce, by means of Article 17 of Annex VII, an “exchange guarantee” for the benefit of officials so as to safeguard them for all time from the effects of such fluctuations as might occur in the monetary parities and from the increased cost to which such fluctuations might give rise with regard to the financial obligations assumed by the staff in any particular Member State (cf. Opinion of Mr Advocate General Dutheillet de Lamothe in Joined Cases 63 to 75/70 Bode [1971] ECR 549, at p. 557). The true reason for the transfer facilities regulated by that provision must be seen in the light of the historical context of the preparatory work on the texts of the Staff Regulations in 1961 when exchange control was often very strict and yet officials of different nationalities had to be freely allowed to honour their financial commitments in their countries of origin or in the countries where their families resided. Subsequently, as a result of the new situation in which currencies “float”, it became in practice easy to take improper advantage of the ratio legis of Article 17 of Annex VII, since transfers of a part of officials' remuneration, although within the limits laid down in a “code of good conduct” established in June 1974, became a means of obtaining “strong currencies” at a rate much lower than the market rate, with consequent adverse effects on the Community budget. As regards the alleged discrimination between officials and pensioners, the Commission contends that in fact the only legal principle applicable is that there must be no arbitrary discrimination, that is to say discrimination for which there are no objective grounds, and that the principle of equality is not applicable. The situation of pensioners, taken into account in Article 4 of Regulation No 3085/78, is not the same as or even comparable with that of officials who arrange for transfers to be made. In the case of pensioners the new system has entailed a sharp reduction, from one month to the next, which may be as much as half the amount in lire previously obtained from resale of the amount paid in Belgian francs or German marks in respect of the pension. On the other hand, in the case of serving officials, the increase in the amount of funds required for the transfers is nowhere near that percentage since at the most only 35% of remuneration may be transferred. In extreme cases, those of transfers to Germany of 35% of remuneration for March of an official employed in Italy, the increased cost of the transfer might at the most be around 25% of the total remuneration for April. In the applicants' case, the highest increase in the cost of the transfers did not exceed, in relative terms, 5.62% of the total remuneration for April. With regard to the Staff Regulations the Council has indeed a “discretionary power” and, where there is discretionary power, there can be no question of restricted authority. Since it is clearly acknowledged that no superior rule of law requires the Council to maintain in perpetuity the IMF parities for transfers, it is easy to dispose of statements to the effect that the institutions exceeded their restricted authority when no restriction in fact ever existed in this sphere. Having regard to the case-law of the Court, the Commission can find no grounds to conclude that the amendments made by the Council to Article 63 of the Staff Regulations and Article 17 of Annex VII thereto might constitute a misuse of its powers. Being entitled to adapt the Staff Regulations to “economic realities” (Case 28/74 [1975] ECR 463) the Council, on the contrary, attained the objective which it pursued (updating of the rates) witıout misusing its powers. The updating of the rates was not carried out, by improper means, within the context of the annual adjustment of remuneration, which is referred to not in Council Regulation No 3085/78 but in Regulation No 3084/78 of 21 December 1978 adjusting the remuneration and pensions of Officials and Other Servants of the European Communities and the weightings applied thereto (Official Journal 1978 L 369, p. 1). The Parliament was certainly not led into error but acted in full knowledge of the circumstances. It is in fact quite clear from its opinion that it was perfectly aware that the proposal for updating of the rates related also to transfers and that the consequence thereof would be an increase in the cost of such transactions when the country of destination was one with a strong currency. Nevertheless, its opinion was that it was “appropriate ... to abandon the exchange ratios introduced in 1965”, since the proposed updating would not have the result of “affecting the rights of staff”. It is wrong to claim that the assurances given regarding the “financial neutrality” of the operation extended also to the consequences of the updating of the rates for transfers. No assurance was ever given on behalf of the Commission (through an “authorized person”) to the effect that there would be no increase in the cost of transfers, since such a guarantee would interfere with the work of nationalization with a view to adapting the Staff Regulations to the economic realities.
3. In their reply, the applicants claim that introduction of the EUA was received as a political measure, whereas the application of the rate applicable to the general budget of the Communities was after all merely a simple operation of self-defence on the part of the institutions. Accordingly, there was indeed an infringement of an essential procedural requirement. As regards the concept of vested rights, Mr Advocate General Mayras emphasized in Gillet, cited above, that the Community authority is entitled at any time to amend the provisions of the Staff Regulations in any way which it considers to be in accordance with the interests of the service. The applicants have been unable to identify any interest of the service which might have compelled the authorities to curtail what the Commission described as unjustified advantages. It its judgment in Case 54/77 Herpels 1978 ECR 585, the Court stated that “an official cannot in any case claim a vested right unless the facts giving rise to that right arose under a particular set of Staff Regulations prior to the amendment decided upon by the Community authority”. The applicants are in no doubt that they signed their contracts on terms wholly different from those which it is sought to impose upon them now and take the view that those earlier conditions may not be changed from one day to the next. It may be possible to apply the new provisions without any transitional arrangements to new transfers, for example to new insurance contracts, but in the case of transfers authorized under the old provisions the Court should have regard to the fact that the event giving rise to them, namely entering into the contract, took place before the amendment was made to the Staff Regulations. There is a considerable difference between the circumstances of the Herpels case, in which the applicant wrongly enjoyed the benefit of the separation allowance for a period of seven years, and the present case in which it is even formally admitted by the defence that in the past the applicants were perfectly entitled to the favourable exchange conditions regarding their transfers, particularly since they had been encouraged by the conduct of the Commission itself which, in 1972, had made the conditions for transfers more advantageous despite warnings from the financial control department. As regards the assurances given by the Commission to the Parliament, they related to “remuneratıon and other payments”. Accordingly, a guarantee was indeed given that the “residual” income also would not be diminished. As regards the arguments relating to restricted authority and misuse of powers, the applicants point out that in his opinion in Case 114/77 Jacquemart [1978] ECR 1697, at p. 1718, Mr Advocate General Warner stated that “the power for the Council to lay down the Staff Regulations ... must ... be subject to the limits imposed by the general principles of Community law”. It is not a question of claiming that the Council could not change the parities in respect of commitments entered into by officials after its decision but of preventing the exchange rate from being amended in respect of pre-existing obligations. Thus, the Council was subject to a restriction as regards the obligations entered into before 28 December 1978. The misuse of power arises from the fact that a change purporting to be an updating of the exchange rates was in fact a more substantial change. In the past, the amounts transferred were, as a result of the weighting, influenced only by the living conditions obtaining at the place of employment. Under the new system, transfers are made at the updated rate but only the weighting of the country of destination is applied. The applicants are of the opinion that the Parliament did not understand the effect which the change of weighting would have on the cost of transfer operations; if it had understood that effect, it would have been unable to form the view that the new system would in no way affect officials with regard to remuneration and “other payments”. The defendant asserts that the Parliament “was perfectly aware that with regard to transfers there was no longer any question of financial neutrality and that an increase in the cost of such transfers might arise from the updating of the rates”. The applicants, whilst recognizing the candidness of such a statement, point out that the increased cost of the transfers derives to a considerable extent from the fact that the new weighting is that of the country to which the transfer is to be made.
4. In its rejoinder, the Commission asserts with regard to the infringement of essential procedural requirements that in the light of Article 149 of the Treaty the unanimous adoption by the Council of Regulation No 3085/78 renders pointless the question whether or not it necessary to consult the Parliament again. The applicants demonstrate their misapprehension as to the concept of vested rights by confusing it with the concept of legitimate interests. If that view were adopted, officials would have the benefit of a safeguard which prevented for all time any amendment to the Staff Regulations which might encroach upon any advantage. The applicants do not produce any evidence to support their view that Regulation No 3085/78 is not consonant with the interests of the service. On the contrary, those interests dictate that the system of transfers should not be used otherwise than for the purposes for which it is intended, to the detriment of the budget of the Communities. Moreover, the event giving rise to the right to make transfers — namely the “duty performed” and not signature of the contract — did not arise under the scheme of the previous text of the Staff Regulations. Again, an official's salary is paid to him not by reason of his needs but by reason of his work. It is wholly inappropriate to refer to the protection of legitimate expectation, since the Council never undertook to freeze for all time the exchange rates based on the 1965 IMF parities. Similarly, the Commission clearly told the Parliament (see extract from the accounting document annexed to Report No 218/77 of the Committee on Budgets) that the introduction of the European Unit of Account involved an increase in the costs of transfers. Without doubt, in the exercise of its discretion regarding choice of the soıution to be adopted, the authority responsible for the Staff Regulations must take care not to infringe superior rules; however, if it does infringe them, it should be censured for acting ultra vires rather than for misusing its powers. The weighting in force at the place of employment was not replaced merely by the weighting of the country to which the transfer is made. The weighting applicable to transfers is, in accordance with Article 17(3) of Annex VII, that “representing the difference between the weighting for the country [in whose currency the transfer is made and the weighting for the country] in which the official is employed”. Moreover, the second recital in the preamble to Regulation No 3085/78 expressly mentions the need to amend the detailed arrangements for the transfers; the updating of the exchange rates did not therefore amount to a “screen” intended to mask the adoption of a new weighting for the transfers. The applicants have no grounds for maintaining that they misunderstood the repercussions of the amendment to the system of transfers. In fact, an administrative circular distributed in May 1978 drew attention to “the disappearance of certain advantages now available” with regard to transfers, and indicated that the transfers would thereafter be made on the basis of the value of the European Unit of Account, giving an example of the results of the calculations. It was therefore out of the question to conclude that the operation would be absolutely neutral from the financial point of view, since the object was to eliminate unjustified advantages in the future.
IV — Oral procedure
The parties presented oral argument at the sitting on 2 April 1981.
The Advocate General delivered his opinion at the sitting on 14 May 1981.
Decision
1. By an application lodged at the Court Registry on 17 December 1979, the applicants, officials of the Commission employed at Geel in Belgium, brought an action pursuant to Article 91 of the Staff Regulation of Officials (hereinafter referred to as “the Staff Regulations”) for annulment of the Commission's decisions fixing their remuneration for April 1979 and of the rejection of the complaints lodged by them against those decisions.
2. Articles 63 and 64 of the Staff Regulations in the version in force until the end of 1978 provided: “An official's remuneration shall be expressed in Belgian francs. It shall be paid in the currency of the country in which the official performs his duties. Remuneration paid in a currency other than Belgian francs shall be calculated on the basis of the par values accepted by the International Monetary Fund ... on 1 January 1965. An official's remuneration expressed in Belgian francs shall ... be weighted at a rate above, below or equal to 100%, depending on living conditions in the various places of employment. ... The weighting applicable to the remuneration of officials employed at the provisional seats of the Communities shall be equal to 100% as at 1 January 1962”.
3. In accordance with Article 17 of Annex VII to the Staff Regulations an official may have part of his emoluments transferred either regularly or on an exceptional basis to a country other than that in which he performs his duties. Until 31 March 1979 Article 17(4) provided that such transfers were to be made through the institution which he serves “at the official exchange rate ruling on the date of transfer”. The “official exchange rate” within the meaning of that provision was the last parity accepted by the International Monetary Fund, which had not been altered since 1 November 1969 (for example, BFR 13.66 = DM 1).
4. On 21 December 1978 the Council adopted Regulation (Euratom, ECSC, EEC) No 3085/78 (Official Journal 1978 L 369, p. 6). Article 1 of that regulation provides that Article 63 of the Staff Regulations is replaced by the following wording:
‘Officials’ remuneration shall be expressed in Belgian francs. It shall be paid in the currency of the country in which the official performs his duties.
Remuneration paid in a currency other than Belgian francs shall be calculated on the basis of the exchange rates used for the implementation of the general budget of the European Communities on 1 July 1978.
This date shall be changed, at the time of the annual review of remuneration provided for in Article 65, by the Council acting by a qualified majority upon a proposal from the Commission as provided in the first indent of the second subparagraph of Articles 148(2) of the EEC Treaty and of 118(2) of the Euratom Treaty.
Without prejudice to the application of Articles 64 and 65, the weightings fixed pursuant to these articles shall whenever the above date is changed, be adjusted by the Council, which, acting in accordance with the procedure mentioned in the third paragraph, shall correct the effect of the variation in the Belgian franc with respect to the rates referred to in the second paragraph”.
5. Article 2 of the regulation provides:
“Article 17 of Annex VII shall be replaced by the following:
‘Article 17
1. Payment shall be made to each official at the place and in the currency of the country where he carries out his duties.
2. Under the terms laid down in rules drawn up by common agreement by the institutions of the Communities, after consultation of the Staff Regulations Committee, an official may:
a) through the institution which he serves, regularly have part of his emoluments transferred up to a maximum amount equal to his expatriation or foreign residence allowance:
either in the currency of the Member State of which he is a national,
or in the currency of the Member State in which either his own domicile or the place of residence of a dependent relative is located,
or in the currency of his previous country of employment or of the country in which his institution has its seat, provided that the official in question has been assigned to a post outside the territory of the European Communities;
b) have regular transfers made in excess of the stated maximum stated at the beginning of paragraph (a) provided that they are intended to cover expenditure arising in particular out of commitments proved to have been regularly undertaken by the official outside the country where the institution has its seat or outside the country where he carries out his duties;
c) be authorized, in very exceptional circumstances and for good reasons supported by evidence, to have transferred, apart from the aforementioned regular transfers sums which he may wish to have available in the currencies referred to in paragraph (a).
3. The transfers provided for in paragraph (2) shall be made at the exchange rate specified in the second paragraph of Article 63 of the Staff Regulations; the amounts transferred shall be multiplied by a coefficient representing the difference between the weighting for the country [in whose currency the transfer is made and the weighting for the country] in which the official is employed.’ ”
6. Article 4 of the regulation provides that it is to enter into force on 1 January 1979 and is to apply from 1 April 1979.
7. On 21 December 1978 the Council also adopted Regulation (Euratom, ECSC, EEC) No 3086/78 adjusting the weightings applicable to the remuneration and pensions of officials and Other Servants of the European Communities following the amendment of the provisions of the Staff Regulations concerning the monetary parities to be used in implementing the Staff Regulations. Article 1(1) of the regulation fixes inter alia the weighting applicable to remuneration as 98.7 for the Federal Republic of Germany and 97.8 for the Netherlands.
8. As from 1 April 1979 the cost in Belgian francs of the transfers which the applicants made regularly to their countries of origin or to the Federal Republicıof Germany increased considerably and consequently the balance of their remuneration, after the transfers, was reduced.
9. On 25 and 27 June 1979 the applicants filed complaints under Article 90(2) of the Staff Regulations regarding the increase in the cost of transfers made by them as from April 1979. On 28 September 1979 the Commission replied to the effect that, on the one hand, it could not without exceeding its authority fail to apply Council regulations which had properly entered into force and, on the other hand, that in substance it approved the amendments made to the Staff Regulations.
10. The applicants therefore brought this action asking the Court to declare that the decisions determining their remuneration for April 1979 are illegal and inapplicable and to order the Commission to pay the applicants as from April 1979 and the difference between the amounts to which they were entitled on the basis of the former provisions and the amounts actually received on the basis of Regulation No 3085/78, together with interest at 6% as from the various dates on which the amounts fell due.
11. The applicants allege in the first place an infringement of essential procedural requirements. They maintain that the contested regulations were adopted without the prior consultation with the Parliament referred to in Article 24 of the Treaty of 8 April 1965 establishing a single Council and a single Commission of the European Communities (hereinafter referred to as “the Merger Treaty”) and that the Parliament was led into error regarding the effect of the proposals submitted to it. Consultation with the European Parliament took place on the basis of a proposal from the Commission which was considerably different from the text of the regulation adopted by the Council.
12. The applicants then put forward arguments concerning the content and effects of the regulations. They criticize the application of the regulations, maintaining that implementation of the new wording of Article 17 of Annex VII to the Staff Regulations breaches the principle of protection of vested rights; that since the change in conditions laid down in the Staff Regulations involved a considerable reduction of the net remuneration received by officials it undermined the vested rights of the applicants and their legitimate expectation regarding their employer's conduct; and that the application of the text was in breach of formal commitments entered into by the Commission to the effect that it would ensure that the measures proposed by it would be strictly neutral and would not affect the real value of payments made to officials in respect of their remuneration, pensions and allowances.
13. The applicants also complain of the discrimination which, according to them, is inherent in the transitional provisions applicable to pensions in view of the fact that no transitional provisions are applicable to the transfers made by the applicants in accordance with Article 17 of Annex VII to the Staff Regulations. The Commission should, in the discharge of its duty to assist officials, of which Article 24 of the Staff Regulations constitutes an illustration, have laid down transitional procedures for compensation, by way of an implementing measure, which would have been coterminous with the legal and contractual obligations of the officials.
Infringement of essential procedural requirements
14. It should be noted that, when changes are made to the Staff Regulations of Officials and the Conditions of Employment of Other Servants, Community law requires that the Parliament and the Court of Justice be consulted and that the opinion of the Staff Regulations Committee be obtained. Article 24 of the Merger Treaty provides that “The Council shall, acting by a qualified majority on a proposal from the Commission and after consulting the other institutions concerned, lay down the Staff Regulations of Officials of the European Communities and the Conditiıns of Employment of Other Servants of those Communities”. Article 10 of the Staff Regulations provides that the Staff Regulations Committee (consisting of representatives of the Staff Committees) is to be consulted by the Commission on any proposal for the revision of the Staff Regulations.
15. A distinction should however be made between the requirements of Community law applicable to Regulation No 3085/78, which involves amendment of the Staff Regulations, and those applicable to Regulation No 3086/78, which adjusts the weightings. A regulation such as Regulation No 3086/78, which determines the weightings, is adopted by the Council on a proposal from the Commission pursuant to Article 64 of the Staff Regulations, which imposes no obligation involving consultation.
16. As regards Regulation No 3085/78, it is true that Article 24 of the Merger Treaty provides for consultation with the other institutions concerned, one of those being the Parliament. That consultation, which in particular enables the Parliament effectively to participate in the Community's legislative process, is an essential feature of the institutional balance which the Treaties seek to achieve. Regular consultation with the Parliament constitutes therefore an essential procedural requirement, the disregard of which renders the regulation in question void. It is therefore appropriate to consider whether the required consultation in fact took place.
17. On 1 April 1977 the Commission, after giving notice to the Staff Regulations Committee, placed before the Council a proposal for a Council regulation introducing the European Unit of Account (EUA) into the Staff Regulations (Official Journal 1977 C 99, p. 5). Article 1 concerns substitution of the EUA for the Belgian franc in Article 63 of the Staff Regulations. The proposal incorporated the changes made necessary by the adoption of the EUA, in particular the substitution of a new table in Article 66 of the Staff Regulations, in which remuneration is expressed in European Units of Account, in place of the old table in which remuneration is expressed in Belgian francs. Article 4 of the proposal concerns substitution of the following wording for Article 17(4) of Annex VII to the Staff Regulations:
“Transfers provided for in paragraphs (2) and (3) shall be made on the basis of the value of the European Unit of Account (EUA) specified in the second paragraph of Article 63 of the Staff Regulations; the amounts transferred shall be weighted by a coefficient representing the ratio between the weighting for the country in the currency of which the transfer is made and the weighting for the country of the official's employment.”
The proposal included other provisions which are not pertinent to this case.
18. Having received the proposal and a request for an opinion from the Council, the Parliament gave a favourable opinion (Official Journal 1977 C 183, p. 55). The Parliament's resolution included, inter alia, the following recitals:
“Whereas the sole purpose of the Commission's proposals submitted to Parliament is to express in European Units of Account those values (remunerations, allowances transfers of funds, weightings, tax) hitherto expressed in Belgian francs, without affecting the rights of staff or exposing their emoluments to possible fluctuations;
Whereas following the introduction of the European Unit of Account, weightings will no longer be required to correct exchange parities and will henceforth be used principally to take account of increases in the cost of living, as originally intended;
Whereas the Commission has given assurances that its proposals will in no way adversely affect the remunerations and other allowances of officials and other servants of the European Communities;”
19. The resolution asks the Commission to introduce, in good time, the administrative arrangements needed to ensure that the application of the European Unit of Account does not disrupt existing administrative practices or even temporarıly harm the interests of the European Civil Service and notes the Commission's assurance that its proposal will in no way affect the real value of the payments made to officials in the form of remuneration, pensions and allowances.
20. In a communication to the Council dated 29 November 1978 the Commission expressed the desire that Article 1 of its proposal of 1 April 1977 should be amended. The text of the new proposal corresponds to the first two paragraphs of Article 63 as amended by Regulation No 3085/78. In the same communication, the Commission proposed a transitional period of six months, that is to say until 1 October 1979, for pensioners and recipients of allowances whose net emoluments would suffer a reduction following the updating.
21. Regulation No 3085/78 followed that proposal from the Commission, with a minor amendment to the wording, adding after the proposed transitional provision a further transitional provision: “From that date the difference between the net amounts resulting from the implementation of this regulation and those received in September 1979 shall be reduced by 1/10 per month”.
22. It appears from the report of the Parliament's Committee on Budgets that the Parliament was in a position to assess the possible impact of the Commission's initial proposal on pensions and transfers made under Article VII to the Staff Regulations and that assurances given to the Parliament by the Commission must be understood to the effect that the “neutrality” of the proposal concerned the entire remuneration of officials and that in certain cases the Commission's proposal might have the effect of increasing the cost of transfers.
23. In fact, the regulation finally adopted conformed to the proposal submitted to the Parliament apart from the substitution of updated exchange rates for the EUA and the transitional provisions intended to alleviate the effect of the provisions of the regulation for a specific period with regard to certain pensioners. As regards the substitution of the updated exchange rates for the EUA, it should be noted that the rates adopted exactly reflected the value of the EUA in terms of national currencies as at 1 April 1978, so that the amendment to the initial proposal constituted in reality a change of method rather than of substance. As regards the transitional provision for the benefit of certain pensioners, it should be noted that that provision corresponded broadly to the wish expressed by the Parliament.
24. In those circumstances, further consultation with the Parliament regarding the contested provisions was unnecessary.
Content and effects of the regulations
25. The applicants are of the opinion that the new system for calculating the exchange rates for transfers encroaches upon their vested rights. On the basis of the provisions in force until April 1979 the applicants entered into binding commitments from which they could not be discharged for a specific period of time. The existence for many years of the facility for transferring regularly a certain part of their monthly remuneration induced them to enter into those commitments and they had every right to believe that the system would not be changed to their disadvantage before their commitments, particularly with regard to loans, had expired. They are therefore entitled to the maintenance in force of the old transfer system, or at least to a transitional system continuing to apply the previous exchange rates until they are clear of their commitments. The Commission gave a formal undertaking to the Parliament to ensure that the measures to be adopted would be strictly “neutral” and would not affect the real value of the payments made to officials in the form of remuneration, pensions and allowances. The power of Community institutions is limited by the principle of restricted authority. By decreasing the real values, the institutions contravened that principle, which constitutesıa misuse of power.
26. Furthermore the applicants maintain that the absence, in the contested regulations, of transitional provisions in favour of serving officials similar to those of which pensioners have the benefit breaches the principle of non-discrimination.
27. It is true that the adoption of the updated exchange rates had the effect of increasing the cost of the transfers made to the Federal Republic of Germany pursuant to Article 17 of Annex VII to the Staff Regulations. The amendment of the parities and of Article 17 of Annex VII to the Staff Regulations was, however, made in order to do away with a system which was such as to give benefits to officials employed in certain countries and involve unjustified losses for the Community. As regards the applicants, who are all employed in Belgium, there was no valid reason for them to benefit from artificial exchange rates for making those transfers. Neither the Council nor the Commission had given any assurances to officials that the more favourable system of transfers would be maintained indefinitely. In those circumstances, the adoption of the real rates could not breach any principle relating to protection of their legitimate expectations.
28. As regards the argument based on the principle of restricted authority, it is sufficient to draw attention to the fact that the concept of misuse of power has a precisely defined scope. It refers to cases where an administrative authority has used its powers for a purpose other than that for which they were conferred on it. In this case, no such use occurred. The Council was exercising the powers conferred on it in the normal way when, by means of Regulation No 3085/78, it directly achieved the lawful objective pursued by it, namely the updating of the exchange rates.
29. As regards the alleged discrimination arising from the transitional measures affecting the recipients of pensions, it is sufficient to point out that discrimination in the legal sense consists of treating in an identical manner situations which are different or treating in a different manner situations which are identical. The situation of a serving official differs considerably from that of a pensioner, so that there is no discrimination in a case where the Community legislature accords to pensioners treatment which is not identical to that applied to serving officials.
30. Consideration of the submissions of the applicant having shown that none of the grounds relied upon may be held, the action must be dismissed as unfounded.
Costs
31. Under Article 69(2) of the Rules of Procedure the unsuccessful party is to be ordered to pay the costs.
32. Nevertheless, pursuant to Article 70 of the Rules of Procedure, the institutions are to bear the costs which they have incurred in proceedings commenced against them by officials of the Communities.
On those grounds, THE COURT (First Chamber) hereby:
1 Dismisses the application;
2 Orders the parties to bear their own costs.