JUDGMENT OF 1. 7. 1982 — CASE 1205/79 ADAM v COMMISSION

In the performance of a loan agreement concluded before the entry into force of Regulations Nos 3085/78 and 3086/78 amending inter alia the provisions of Article 63 of the Staff Regulations and of Article 17 of Annex VII thereto, the Commission is therefore correct to apply to the monthly repayments falling due after the entry into force of the regulations in question the exchange rate resulting from application of the updated parities and of the new version of Article 17.

THE COURT (First Chamber) composed of: G. Bosco, President of Chamber, A. O'Keeffe and T. Koopmans, Judges, Advocate General: F. Capotorti Registrar: P. Heim

gives the following

JUDGMENT

Facts and Issues

I — Facts and written procedure

II — Conclusion of the parties

III — Submissions and arguments of the parties

IV — Oral procedure

Decision

Costs

I —. Facts and written procedure

II —. Conclusion of the parties

(a). annul the implied decision of rejection of the complaint submitted in good time by the applicant on the grounds of breach of general principles of law, infringement of legal rules adopted in implementation of the Treaty and misuse of powers;

(b). in the alternative, annul the individual decision of rejection dated 28 September 1979 on all the above grounds and in addition on the ground of infringement of essential prodecural requirements;

(c). declare that the Commission has acted unlawfully in applying from April 1979 to repayments of the building loan granted to the applicant a monetary parity other than that agreed on by the parties and invariably employed in the mutual payments throughout the entire previous period when the contract was in force;

(d). declare in exercise if its unlimited jurisdiction in this case that the Commission is responsible for all the consequences arising from the abovementioned annulment and the abovementioned declaration, namely

(e). order the defendant to pay the costs.

III —. Submissions and arguments of the parties

IV —. Oral procedure

1. By application lodged at the Court Registry on 21 December 1979, Mr Adam, an official of the Commission of the European Communities, employed at Ispra, Italy, brought an action pursuant to Article 91 of the Staff Regulations of Officials primarily for annulment of the Commission's decision altering the method of calculating the monthly amounts payable by him in reimbursement of a building loan, the subject of an agreement between the defendant and the applicant.

2. By a decision of 2 March 1970 concerning the use of sums available under the ECSC budget item Pension Funds, the Council authorized the Commission to set aside 40% of the sums in question for the grant of building loans to officials of the Communities.

3. By a decision of 17 June 1971, the Commission adopted the necessary implementing provisions. Article 9 of which in particular provided that loans covered by this provision shall be expressed in Belgian francs. The payments in respect thereof shall be made in the currency of the country in which the property to be financed is situated, on the basis of the parity ruling at the time of the payment.

4. On 22 December 1972 the applicant entered into an agreement with the Commission under which he received from the Commission a loan of BFR 392000 intended to finance the construction of a dwelling house.

5. By virtue of Article 4 of the agreement, the borrower undertakes to repay the amount of the loan in monthly instalments due on the 15th day of each month in accordance with the table attached to the agreement. The table, drawn up in duplicate and signed by both parties, constitutes an integral part of the agreement.

6. By virtue of Article 5 of the agreement the borrower irrevocably instructs the Commission to deduct or cause to be deducted for transfer to the Commission by the Community institution by which he is or may be employed in the future, on the 15th day of each month, from his monthly salary or other emolument, the monthly instalment shown in the repayment table referred to in Article 4.

7. Article 15 of the agreement provides that any transfer made by the borrower to the lender by way of early repayment or in payment of monthly instalments is to be made in Belgian francs or in the currency of the country in which the property to be financed is situated and in which the loan was advanced. The currency of the loan is to be converted into Belgian francs on the basis of the parity ruling on the date of the transfer.

8. In the table referred to in Article 4 of the agreement the amount of the loan, the monthly instalment, the monthly interest, the monthly repayment of principal and the principal outstanding are expressed in Belgian francs.

9. The amount of the loan was converted into Italian lire on the basis of BFR 1 = LIT 12.50, the parity notified to the International Monetary Fund on 1 January 1965 which at that time was used as the basis for calculation of the remuneration of officials in accordance with Article 63 of the Staff Regulations. Correspondingly, the sums lent were repaid (likewise on the basis of the abovementioned exchange rate) by means of deductions made by the Commission as lender from the monthly remuneration of the official.

10. The system operated as follows: the official's basic salary, to which the weighting was applied (for example BFR 100000 x Italian weighting 157.8 in March 1979) was reduced by the amount of the monthly repayment instalment in respect of the building loan (for example BFR 5000) and, in this example, the net remuneration became BFR 152800, which was converted into Italian lire at the rate of BFR 1 = LIT 12.50.

11. On 25 July 1975 the Commission decided in order to resolve the difficulties arising from the fluctuation of exchange rates to amend Article 9 of the implementing provisions of 17 June 1971; as a result, for loan agreements entered into after that date both the loans and the repayments were to be made exclusively in Belgian francs.

12. Article 2 (1) of the decision provides as follows:

13. By letter of 21 August 1975 that decision was notified to the applicant. The letter contained the statement: In the event of reduction of the debt, all repayments made subsequently are to be made in Belgian francs. You may therefore no longer make any advance repayment in the currency in which the loan was made.

14. By declaration of 26 September 1975 the applicant sought a reduction of BFR 34960 in his principal debt (the amount specified in the letter of 21 August 1975). The reduction was granted by the Commission, with a consequent reduction in the monthly repayments expressed in Belgian francs.

15. After that reduction was made, the Commission continued until 31 March 1979 to make transfers in respect of the monthly instalments payable by the applicant by converting into Belgian francs the amount transferred in lire, adopting the parity referred to in Article 63 of the Staff Regulations.

16. Following the entry into force of Council Regulations Nos 3085/78 and 3086/78 of 21 December 1978 (Official Journal L 369, pp. 6 and 8) which amended inter alia the provisions of Article 63 of the Staff Regulations concerning monetary parities and of Article 17 of Annex VII concerning transfers, the Commission applied, for conversion into Belgian francs of the Italian lire deducted in respect of the monthly repayment, the rate resulting from application of the updated parities and from the new version of Article 17 of Annex VII.

17. On 10 July 1979 Mr Adam lodged a complaint pursuant to Article 90 of the Staff Regulations against the conversion of lire into Belgian francs in accordance with the new procedure. His complaint drew no response, other than a mimeographed memorandum dated 28 September 1979.

18. The applicant alleges a breach of the principle of the protection of legitimate expectation. In his view, the offer to reduce the debt should have been presented as an offer to reduce the principal debt subject only to the obligation to make future repayments in Belgian francs. Since such repayments had always been made in Belgian francs, on the basis of the official parity notified to the International Monetary Fund, the applicant was not in a position to understand the results which the Commission sought to achieve.

19. He also maintains that the Commission misused its powers by unilaterally imposing a different parity by means of Regulations Nos 3085/78 and 3086/78, making the borrower's commitment particularly onerous.

20. In the third place, he states that there is discrimination between officials who received their loan on the basis of BFR 1 = LIT 12.50 on the one hand and officials who entered into their loan agreements after 1977 on the other. The former are obliged to repay their loans on more onerous terms as a result of the system introduced by Regulations Nos 3085/78 and 3086/78, whereas the latter received a considerably higher principal amount in lire, specifically as a result of application of the exchange rate for the Belgian franc and the Italian lire existing in the money market, whilst the Commission continued to apply the parity of the International Monetary Fund to their repayments until April 1979.

21. The applicant's first two complaints are based on the view that the parity used for conversion of the amount of the loan into Italian lire and for the conversion of lire into Belgian francs for the monthly repayment instalments ought to be the parity notified to the International Monetary Fund and that the Commission was not entitled unilaterally to adopt any other parity.

22. It appears from the file on the case that the exchange rate used for the conversion of the amount of the loan into Italian lire was the parity notified to the International Monetary Fund in 1965 which, at the time of the loan, was the reference parity determined in Article 63 of the Staff Regulations. In essence the applicant's view is that that same rate must be used throughout the duration of the agreement for the conversion into Belgian francs of the funds transferred to the Commission to repay the loan by means of the monthly instalments provided for in the agreement.

23. The Commission contends on the other hand that the exchange rate to be used for that conversion must be the one fixed as a reference parity in Article 63 of the Staff Regulations and that the monthly transfers may be made pursuant to the provisions of Article 17 of Annex VII to the Staff Regulations, which enables officials regularly to transfer part of their emoluments through the institution by which they are employed in the currency of certain other Member States.

24. In pursuance of that interpretation of the agreement, the Commission converted the amounts in lire transferred to repay the loan in question into Belgian francs according to the parity referred to in Article 63 of the Staff Regulations until the entry into force of Regulations Nos 3085/78 and 3086/78. As from 1 April 1979 it also based its calculations for conversion of the monthly payments on the rates laid down in the Staff Regulations, as amended by Regulations Nos 3085/78 and 3086/78 and applied the provisions of Article 17 of Annex VII to the Staff Regulations in its amended version. It claims that that method of making the transfers conforms wholly with the agreement.

25. The applicant's view is untenable. It disregards the fact that, according to the provisions of the agreement itself, the funds transferred in order to pay the monthly instalments were to be converted on the basis of the parity in force on the date of the transfer, that is to say on the date of each transfer. The agreement did not provide for a fixed parity to apply throughout its duration but rather for various parities which might apply successively during the term of the agreement.

26. It should be recalled that all the recipients of loans were officials of the European Communities and that the agreement provided that repayments were to be made to the Commission by the institution in which they were employed. It was consonant with that situation that the parity to which the agreement referred should be the parity adopted for calculation of the borrower's remuneration, that is to say the parity provided for in Article 63 of the Staff Regulations.

27. In consequence of the events in the money markets which occurred in and after 1971, the parity notified to the International Monetary Fund for the lira ceased to be valid. For a time, the lira floated freely. Finally, with the introduction of the European Monetary System a new exchange rate, which might fluctuate within certain limits, was determined for the currencies of the Member States which participated in the system.

28. The practice adopted by the Commission, namely the application to the transfers made to repay the loans in question of the provisions of Article 17 of Annex VII to the Staff Regulations as newly worded, entails the result that the conversion rate is more favourable to the applicant than mere application of the parity for the lira within the European Monetary System.

29. It is clear from the foregoing considerations that the Commission has not changed the parity in contravention of the terms of the agreement and that the alleged breach of the principle of the protection of legitimate expectation and the alleged misuse of power are without foundation.

30. As regards the alleged discrimination between the applicant and borrowers who received their loans after 1977, it should be noted that the reduction of the debt which the applicant was allowed in 1975 had the effect of placing him in the position in which he would have been if he had received the amount of the loan at the market rate. Moreover, the applicant had the benefit, until April 1979, of the parity initially provided for in the agreement. He could not therefore maintain that he was treated in a manner less favourable than the other borrowers. The allegation of discrimination cannot therefore be upheld.

31. It appears from the foregoing considerations that the applicant's complaints are without foundation and that the application must be dismissed.

32. Under Article 69 (2) of the Rules of Procedure the unsuccessful party is to be ordered to pay the costs.

33. However, under Article 70 of the Rules of Procedure costs incurred by the institutions in proceedings by servants of the Communities are to be borne by those institutions.

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

1 Dismisses the application;

2 Orders the parties to bear their own costs.