JUDGMENT OF 5. 6. 1973 — CASE 81/72 COMMISSION v COUNCIL

In Case 81/72

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

gives the following

JUDGMENT

Issues of fact and of law

I — Statement of facts and procedure

II — Submissions of the parties

III — Pleas and arguments of the parties

A — Pleas of the applicant

1. On the first issue

2. On the second issue

B — Pleas of the defendant

Grounds of judgment

A — On the nature and effect of the Decision of 21 March 1972

B — On the scope of the Decision of 21 March 1972

Costs

I —. Statement of facts and procedure

II —. Submissions of the parties

III —. Pleas and arguments of the parties

A —. Pleas of the applicant

1. On the first issue

(a). The Commission disputes the view that the Decision of 20 and 21 March cannot result in a restriction of the freedom of appraisal which the Council possesses by virtue of Article 65.

(b). The interpretation followed by the Council is further refuted by the fact that in the contested Regulation, the Council implemented all the essentials of its Decision of 20 and 21 March 1972, except that relating to the increase in purchasing power.

(c). Finally, the very wording of the Decision argues in favour of the Commission's interpretation. It is stated there that there shall be an experiment limited to a period of three years, at the end of which the agreed method of calculation shall be reconsidered, and that this Decision shall not create vested rights. These precautions would have been superfluous if the text only had the significance attributed to it by the Council.

2. On the second issue

B —. Pleas of the defendant

1. The purpose of the action is the annulment of Articles 1 to 4 of Council Regulation No 2647/72 (OJ L 283, 20. 12. 1972, p. 1) adjusting the salaries and pensions of the officials of the European Communities and of the other servants of these Communities, to the extent to which these articles fix scales of salaries and other grants and allowances by adjusting them, on the basis of an increase in purchasing power limited to 2.5 %;

2. By Article 65 (1) of the Staff Regulations, the Council shall each year review the remunerations of the officials and other servants: in the light of a report by the Commission and based on a joint index prepared by the Statistical Office of the European Communities in agreement with the national statistical offices of the Member States: the index shall reflect the situation as at 1 July in each of the countries of the Communities;

3. In implementation of this Decision the Commission, in collaboration with the organizations representing the staff, submitted proposals to the Council substituting, in connection with the increase in purchasing power in real terms, for the joint index referred to in Article 65 (1), sub-paragraph 1, and the so-called specific index derived from the alteration in salaries of the national public services previously used a single index derived from the total emoluments per head.

4. On 20 and 21 March 1972, the Council decided to apply, as an experiment and for a period of three years, a system of adjusting remunerations, involving recourse to the said two indices for the rise in the purchasing power of remunerations.

5. In the report which the Commission presented to the Council on 27 September 1972 in implementation of Article 65 of the Staff Regulations, the Commission finding that the two indices respectively disclosed, as at 1 July 1972, an increase in the purchasing power of national salaries of 3.6 % and 3.9 %, proposed a gross real increase of Community remunerations equal to the arithmetical mean of the said indices, viz. 3.75 %.

A —. On the nature and effect of the Decision of 21 March 1972

6. The nature and effect of the Decision of 21 March 1972 must be appraised within the framework of the Council's implementation of the task assigned to it by Article 65 of the Staff Regulations.

7. This provision thus leaves to the Council the choice of the means and forms best suited to carry out an emoluments policy in conformity with the criteria laid down by Article 65.

8. There is no doubt that in deciding on the act of 21 March 1972, the Council had gone beyond the stage of preparatory consideration and had entered on the phase of decision-making.

9. It appears, therefore, that by its Decision of 21 March 1972, the Council, acting within the framework of the powers relating to the remunerations of the staff conferred on it by Article 65 of the Staff Regulations, assumed obligations which it has bound itself to observe for the period it has defined.

10. Taking account of the particular employer-staff relationship which forms the background to the implementation of Article 65 of the Staff Regulations, and the aspects of consultation which its application involved, the rule of protection of the confidence that the staff could have that the authorities would respect undertakings of this nature, implies that the Decision of 21 March 1972 binds the Council in its future action.

11. The circumstance that Article 65 by endowing the Council with a wide power of appraisal with regard to the economic and social policy of the Communities, requires it to take account of all possible relevant factors, does not prevent it from pre-determining, under certain circumstances and conditions, in a first stage and for a limited time, the framework of, and the factors to be taken into account in, its decision.

B —. On the scope of the Decision of 21 March 1972

12. The defendant claims that the Decision of 21 March 1972 does not have the scope attributed to it by the applicant with regard to the limits which it imposes on the excercise of the discretionary power which Article 65 confers on the Council.

13. The use of the words in the light of is chiefly to be explained by the circumstance that, in order to remain within the framework of Article 65, the reference to a single index, proposed by the Commission, was replaced by a reference to two indices and, further, for the proposal of the Commission to retain the arithmetical mean of these two indices there was substituted the decision to depart from this automatic application by maintaining a bracket within which the Council would be free to appraise at what level the increase in remuneration should be fixed.

14. These Articles 1 to 4 must therefore be declared void.

15. However, to avoid discontinuity in the system of remuneration, the second paragraph of Article 174 of the Treaty should be applied so that the Articles declared void shall continue to have effect until the Council passes a new Regulation in consequence of the present judgment.

16. By Article 69 (2) of the Rules of Procedure, the unsuccessful party shall be ordered to pay the costs, if there is a submission to that effect.

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral arguments of the parties; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 173 and 174, second paragraph; Having regard to the Treaty establishing a single Council and a single Commission of European Communities, Article 24 thereof; Having regard to Article 65 of the Staff Regulations; Having regard to the Protocols on the Statute of the Court of Justice; Having regard to the Rules of Procedure of the Court of Justice of the European Communities; THE COURT hereby:

1 Annuls Articles 1 to 4 of Council Regulation of 12 December, No 2647/72;

2 Declares that these Articles shall continue to have effect until the Regulation to be made in consequence of the present judgment comes into operation.