JUDGMENT OF 26. 2. 1981 — CASE 64/80 GIUFFRIDA AND CAMPOGRANDE v COUNCIL

In Case 64/80

THE COURT (Third Chamber) composed of: J. Mertens de Wilmars, President, Lord Mackenzie Stuart and U. Everling, Judges, Advocate General: G. Reischl Registrar: JA. Pompe, Deputy Registrar

gives the following

JUDGMENT

Facts and Issues

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

I — Facts and written procedure

The Council has the power under Article 65 of the Staff Regulations to review the remuneration of officials and to decide what, if any, adjustments should be made. Article 64 provides for the possibility of weighting the salary depending on living conditions in the various places of employment.

By Decision of 29 June 1976 the Council decided that in future it would adjust the remuneration of officials and incorporate those adjustments in the table contained in Article 66 of the Staff Regulations which determines the basic gross salaries for each grade and step. As a result of so doing the weightings for Belgium and Luxembourg were fixed at 100% and incorporated into the salary scale as follows :

The new scale in gross terms shall be drawn up by calculating for each step or class the gross amount which, after deduction of tax and compulsory contributions, gives the new net amount referred to above (that is to say after adjustment) ; This conversion of net amounts into gross amounts shall be based on the situation of an unmarried official who does not receive the various allowances.

That method did not provide for any adjustment in the part liable to Community tax in line with the increase in remuneration. Its implementation by Council Regulation No 3177/76 of 21 December 1976 adjusting the remuneration and pensions of officials and other servants of the European Communities and the weightings applied thereto (Official Journal L 359, p. 1) was the origin of distortions between the remunerations of officials to the advantage of those enjoying abatements in their taxable income and/or expatriation allowance.

Faced with those distortions and in order to avoid their repetition in the future the Council introduced in its Regulation No 2859/77 of 19 December 1977 adjusting the remuneration and pensions of officials and other servants of the European Communities and the weightings applied thereto (Official Journal L 330, p. 1) an amendment to Regulation No 260/68 of the Council of 29 February 1968 laying down the conditions and procedure for applying the tax for the benefit of the European Communities (Official Journal, English Special Edition 1968 (I), p. 30). For the period 1 July 1977 to 30 June 1978 that amendment made the parts liable to Community tax subject to a weighting of 106.084%. Subsequently the Council, by Decision of 26 June 1978, amended its decision of 29 June 1976 and introduced a formula for adjusting the amounts liable to tax as provided for in Article 4 of the above-mentioned Regulation No 260/68 of the Council.

Although the Council thus avoided a repetition of the distortion occurring on the adjustment by Regulation No 3177/76 of remuneration and pensions for the period from 1 July 1976 to 30 June 1977, it was still a fact that since the subsequent adjustment of salary was based on the scale adopted in that regulation, the distortion to which it led passed on from year to year.

In order to put an end to that situation the Council adopted on 21 January 1980 Regulation No 160/80 amending the Staff Regulations of Officials (Official Journal L 20, p. 1). That regulation laid down a new table of gross monthly salaries abolishing the distortions in question. It entered into force on 27 January 1980 and applied from 1 July 1979. It provides, however, that no part of the amounts paid during the period between 1 July 1979 and the date on which the regulation enters into force shall be required to be repaid. Further it makes transitional provision for officials who suffered a reduction in income on the application of the new scale. For their benefit and so long as application of the new scale would involve a reduction in income the previous system continues to apply.

By application lodged at the Court Registry on 28 February 1980 the applicant brought an action for a declaration that the aforesaid Council Regulation No 160/80 is void.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General the Court (Third Chamber) decided to open the oral procedure without any preparatory inquiry.

It nevertheless invited each of the parties to answer two questions which they did within the periods prescribed.

II — Conclusions of the parties

The applicants claim that the Court should:

“— Rule that the application is admissible and well founded and order the defendant to pay the costs”.

The Council claims that the Court should :

“— Rule that the application is inadmissible and in any event unfounded and order the applicants to pay the costs”.

III — Submissions and arguments of the parties

Admissibility

In the view of the applicants the contested regulation constitutes in reality a set of specific decisions of direct and individual concern to them within the meaning of the second paragraph of Article 173.

It is of individual concern to the applicants not only because those to whom Regulation No 160/80 is addressed are identifiable (they are all the officials benefiting from a distortion of salary as a result of the entry into force of Regulation No 3177/76), but above all because the Council necessarily had to take into account the situation of each of those officials and it was on that basis that it decided to adopt the corrective measures contained in Regulation No 160/80. Thus not only were those to whom the regulation was addressed identifiable but their individual situations were taken into account and this conditioned the adoption of the contested measure.

In addition the applicants observe that the purpose of Regulation No 160/80 as regards the adjustment of remuneration is not of a legislative but of an administrative nature as the Court recognized in its judgment of 5 June 1973 (Case 81/72 Commission v Council [1973] ECR 575).

It is also of direct concern to the applicants by reason of the fact that the measures adopted in Regulation No 160/80 are directly applicable without the intervention of any authority being necessary and that they involve a partial freezing of remuneration directly affecting their financial positions.

In the Council's view Article 1 of Regulation No 160/80 fixes in a general and abstract way according to grades and steps the remuneration of all officials. In place of the rule in Regulation No 3177/76, whose legislative nature no-one can deny, it substitutes a new rule incorporating the weightings into the salary scale.

The fact that the applicants belong to a group of officials whom the repealed regulation specially favoured in no way means that the new regulation is of individual concern to them. Article 1 of the new regulation makes no distinction, founded on a factual situation, between officials. Article 2 makes a distinction only to protect the vested rights of those who benefited from the former regulation and the applicants have no interest in challenging that provision which is to their advantage.

The Council concludes by stressing that if the applicants' arguments were accepted the result would be that it would be possible, with reference to suitable facts, to form a number of subgroups distinguished by individual features within an unspecified number of persons affected by a measure and that would render ineffective the conditions laid down by the second paragraph of Article 173 that the contested measure must be of individual concern to the applicant.

Substance

The applicants make five submissions in their application: in the first place they claim that the statement of reasons on which Regulation No 160/80 is based is erroneous. Contrary to what is stated in the second recital in the preamble to that regulation it was not adopted to rectify “unintended increases in remuneration”.

In spite of the unfavourable opinion of the Commission, the staff representatives and the Working Party on the Staff Regulations and after the staff representatives expressly drew attention to the problem of distortions, the Council adopted Regulation No 3177/76 which was to be at the origin of the increases in remuneration rectified in Regulation No 160/80. In the applicants' view, therefore, it is not possible to speak of unintended increases since the Council had been made fully aware of the risks of distortion inherent in the operation which it had in mind.

In the second place the Council, by adopting Regulation No 3177/76 in spite of the warnings given it by the Commission, the Working Party on Staff Regulations and the staff representatives, failed in the elementary duty of care incumbent upon a public authority in the exercise of its powers and thus established its liability.

In the third place the Council's departure from the method adopted in Regulation No 3177/76 not only after the expiry of the period of two months provided for in the third paragraph of Article 173 of the EEC Treaty but even after the expiry of the period of a year in Article 65 of the Staff Regulations for the annual review of salaries frustrates the legitimate expectation of the applicants in the maintenance of the method of calculation adopted by Regulation No 3177/76.

In the fourth place adjustment of salaries for reasons other than those listed in Article 65 of the Staff Regulations, and in disregard of the procedure specified there, constitutes an infringement of the vested right of officials in the maintenance of their salary scale.

In the fifth place Regulation No 160/80 was adopted in breach of essential procedural requirements. The Council's intention to adopt the regulation was formed before the unfavourable opinion of the European Parliament was known. Further the Council observed neither the conciliation procedure requested by the Parliament pursuant to the Joint Declaration of 4 March 1975 nor the consultation procedure with the staff which it terminated before the opinion of the Parliament was given.

In its defence the Council rejects the various submissions put forward by the applicants.

Although, like the staff representatives, the Council was not unaware of the technical difficulties associated with incorporating weightings into the scales of remuneration, it is, in its view, not possible to accuse it of having intended increases in financial entitlement. On the contrary the fact that the Decision of 29 June 1976 contains a Section V headed “Review clause” shows its intention of rectifying any distortion.

The applicants' second submission is incompatible with their assertion that Regulation No 160/80 is in fact a bundle of individual decisions, in that the submission alleges a lack of care in the exercise of the Council's legislative power. The submission moreover is bad in fact and in law. The lack of care, even assuming its existence, would be in respect of Regulation No 3177/76 and not in respect of the contested measure and the legal principle cited governs only the subordinate power to take decisions.

Since the Council had always stressed its intention to avoid distortions and to review, if necessary, Regulation No 3177/76, it is not possible, to accept the submission that there has been a breach of the principle of the protection of legitimate expectations. In the Council's view the repeal or subsequent amendment of the regulation was perfectly lawful. In any event the contested regulation does not, properly speaking, infringe vested interests.

The fourth submission of infringement of vested interests is as unfounded as the previous ones. Neither the object nor the effect of Regulation No 160/80 is to challenge the alleged vested interests of the applicants. The object of Regulation No 3177/76 was certainly not to give the applicants an irrevocable right to a better remuneration and they certainly cannot infer such a right from the regulation. The rights of officials are determined by Articles 64 and 65 of the Staff Regulations which prescribe to the Council the aims which it must pursue as regard salary. Those aims include, first and foremost, equality among officials.

In addition since it was a legislative measure Regulation No 3177/76 could not give the applicants personal “vested” interests.

Finally there was no infringement of essential procedural requirements since the regulation was adopted after the Parliament had given its opinion and the application does not state in which way the other procedures cited were disregarded.

In their reply the applicants first of all stress that the solution adopted by the Council in Regulation No 3177/76 was one of the possible ways of incorporating the weighting and did not involve any breach of the principle of equality. Council Regulation No 3177/76 is therefore perfectly legal from a strict legal point of view. Further the applicants state that they are not disputing the Council's right to adopt another method of incorporation for the future but simply the retroactive substitution of Regulation No 160/80 for Regulation No 3177/76.

The submissions which they make are identical to those contained in the application and fresh argument is devoted only to the first, fourth and fifth submissions.

As regards the argument relating to the alleged erroneous character of the statement of reasons on which Regulation No 160/80 is based, the applicants put forward two new documents in support of their assertion that the Council could not fail to be aware of the distortions which Regulation No 3177/76 was going to cause.

In the Commission's proposal for an amendment of Regulation No 3177/76 it is stated:

“... the application of that method of incorporating the weightings has involved sometimes considerable gains for officials in active employment and equally serious losses for quite a number of those in receipt of pensions or allowances for termination of service pursuant to special measures adopted under Regulations Nos 259/68, 2530/72 and 1543/73. The group of national experts (Working Party on the Staff Regulations) has considered the distortions giving rise to financial advantages. On the other hand it had not been foreseen that incorporation would involve reductions in a certain number of cases.”

In a note dated 8 November 1977 from the Directorate-General for Personnel and Administration of the Commission containing the minutes of the conciliation meeting of 28 October 1977 on the 1977 report for the annual review of remuneration it was stated with regard to the method of incorporating weightings: “Although the Council delegations were aware that incorporation could not be without effect, they were nevertheless surprised at the increases found in very many cases ...”.

In the applicants' view the Council could, however, not be mistaken about the quantitative effect of incorporating weightings since as early as 1972 a weighting of 128 had been the subject of similar incorporation involving effects the magnitude of which had certainly been felt.

Finally the fact that there is a revision clause in the Decision of 29 June 1976 enables the Council to determine any improvements in the system established and to correct any distortions solely for the future.

Under the fourth submission relating to infringement of vested interests the applicants state that they are not claiming a right that Regulation No 3177/76 should continue in force, for which there is no foundation in law, but the right to profit from its effects which is recognized in the case-law of the Court (Joined Cases 7/56 and 3 to 7/57 Algera [1957] ECR 39 and Joined Cases 42 and 49/59 SNUPAT[1961] ECR 53) and by legal commentators. They add that even if it had to be admitted that Regulation No 3177/76 were irregular it would have been possible to withdraw it only within a reasonable period, which had long since expired.

Finally as regards infringement of essential procedural requirements the applicants state:

It was on 17 January 1980, before the opinion of the Parliament was known, that the Council informed the staff that it had decided to adopt Regulation No 160/80 and that is the date which must be taken into account in considering whether the Council disregarded the procedure for consulting the Parliament. In any event the fact that the regulation is dated 21 January, that is three days, including a Saturday and a Sunday, after the opinion of the European Parliament was received, shows that the Council attached no importance to it. Because of the wholly negative nature of its opinion the European Parliament invited the Council to consult it and in the circumstances that invitation amounted to a requirement pursuant to the Joint Declaration; in not complying therewith the Council misused its rights in a manner which involved an infringement of essential procedural requirements. The staff representatives refused to enter into consultations with the Council in the absence of an opinion from the Parliament and the Council took the view that the consultative procedure had been correctly followed whereas in the past this procedure had always been subsequent to the opinion of the Parliament.

In its rejoinder the Council maintains that the applicants' first submission contains in fact two heads, the second of which obviously overrides the first. When the applicants insist on the fact that the Council acted intentionally, it is above all to deny the right to reverse “retroactively” the results of its decision. Whilst maintaining its denial that the resulting distortions were persisted in intentionally, the Council is essentially concerned to refute the submission founded on retroactivity which, in its view, is expressed in different terms in the second, third and fourth submissions of the applicants.

In the Council's view the applicants, in putting forward the general principle of the non-retroactivity of administrative measures to contest the fact that the new regulation may freeze, if only temporarily, the remuneration of officials who benefited from the former regulation, fundamentally misconceive the import of that principle which in no way prevents those situations from being modified as to the future. All that the principle prohibits is to reduce salaries which have fallen due and that is not contemplated in Regulation No 160/80. The Council considers that to accept the point of view of the applicants would mean denying the “law of change”, which is another fundamental principle of public administration.

As regards the infringement of essential procedural requirements, the Council observes that Regulation No 160/80 is dated 21 January 1980 and thus subsequent to the opinion of the Parliament even if proposals and intentions may have been put forward or stated before that date. The conciliation procedure with the Parliament invoked by the applicants is, as such, not binding and in any event applies only to the adoption of measures of general application involving fundamental choices of Community policy and having appreciable financial effects. Those conditions are not fulfilled by the contested measure. Finally there is nothing to require the Council to enter into consultation with the staff representatives only after receipt of the opinion from the Parliament.

IV — Answers to questions put by the Court

At the request of the Court each of the parties forwarded tables of figures showing for two selected grades and steps the calculation made to arrive at the salary in the scale resulting from Regulation No 3177/76 and illustrating the distortions arising from this in the net remuneration of officials “put at an advantage” in relation to the remuneration of other officials. The Council also submitted a table showing how the distortions have been rectified for the officials in question by Regulation No 160/80.

The applicants further explained the circumstances in which the Administration had adopted, since 1 July 1977, a method of calculation different from that used in Regulation No 3177/76 and the Council forwarded to the Court a copy of its Decision of 29 June 1976 as amended by Decision of 26 June 1978.

V — Oral procedure

The parties submitted oral argument at the sitting on 27 November 1980. The Advocate General delivered his opinion at the sitting on 29 January 1981.

Decision

1. By application lodged at the Court Registry on 28 February 1980, F. Giuffrida, an official of the Council of the European Communities and G. Campogrande, an official of the Commission of the European Communities, brought proceedings pursuant to the second paragraph of Article 173 of the EEC Treaty for a declaration that Council Regulation No 160/80 of 21 January 1980 amending the Staff Regulations of Officials and the Conditions of Employment of Other Servants of the European Communities (Official Journal L 20, p. 1) is void.

2. According to the second paragraph of Article 173 of the EEC Treaty a natural person has the right to institute proceedings for a declaration that a decision is void only if the decision is addressed to that person or, although in the form of a regulation, is of direct and individual concern to him. The action by the applicants for a declaration that a Council regulation is void is therefore admissible only in so far as it appears that the contested measure, although in the form of a regulation, is of direct and individual concern to them.

3. Under the second paragraph of Article 189 of the Treaty the test for distinguishing between a regulation and a decision is to ascertain whether the measure in question has general application or not.

4. Article 1 of Council Regulation No 160/80 amends Article 66 of the Staff Regulations and Articles 20 and 63 of the Conditions of Employment of Other Servants by substituting for the tables of monthly basic salaries and remuneration incorporated in those provisions tables modifying those salaries and that remuneration.

5. Article 2 of the same regulation provides certain transitional measures relating to the application of those modified salaries and remuneration for officials or former officials who find themselves in the objective financial situation described in that article.

6. It follows that the contested regulation applies to objectively determined situations and involves legal effects in respect of categories of persons regarded generally and in the abstract. It does therefore have the characteristics of a regulation.

7. These characteristics are not called in question by the fact that it is possible to determine more or less exactly the number or even the identity of the persons to whom it applies at any given time as long as it is established that such application takes effect, as in this case, by virtue of an objective legal or factual situation defined by the instrument in question in relation to its purpose.

8. The action must therefore be declared inadmissible.

Costs

9. Since the present action is based upon Article 173 of the EEC Treaty and not upon Article 179 it is Article 69 (2) and not Article 70 of the Rules of Procedure which applies.

10. Pursuant to that article the unsuccessful party is to be ordered to pay the costs if they have been asked for in the successful party's pleading. Since the applicants have been unsuccessful they must be ordered to pay the costs jointly.

On those grounds, THE COURT (Third Chamber) hereby:

1 Dismisses the action as inadmissible;

2 Orders the applicants jointly to pay the costs.