JUDGMENT OF 15.3.1984 — CASE 28/83 FORCHERI / COMMISSION

In Case 28/83

THE COURT (Second Chamber) composed of: K. Bahlmann, President of Chamber, P. Pescatore and O Due Judges, Advocate General: P. VerLoren van Themaat Registrar: H. A. Rühi, Principal Administrator

gives the following

JUDGMENT

Facts and Issues

I — Facts and written procedure

II — Conclusions of the parties

III — Submissions and arguments of the parties

Introduction

Admissibility

Substance

A — The legality of the new measures adopted by the Exchange Institute

(i) The applicant's arguments

(ii) Toe Commission's arguments

B — The Commission's duty of assistance

(i) The applicant's arguments

(ii) The Commission's arguments

The observations of the interveners

IV — Oral procedure

Decision

Costs

I —. Facts and written procedure

1. The Belgo-Luxembourg rules on foreign-exchange transactions are characterized by the existence of two distinct foreign-exchange markets: a regulated market on which the margins of fluctuation of Belgian and Luxembourg francs as against other currencies are kept within certain limits by the intervention of the Banque Nationale de Belgique and a free market on which the exchange rate is determined by supply and demand and in which the Banque Nationale does not intervene. Consequently, the exchange rates on the two markets move independently, with the foreign-exchange rates on the free market usually being higher than on the regulated market.

2. The applicant, Sandro Forcheri, an Italian national, is an official of the Commission.

3. By order of the Court (Second Chamber) of 14 July 1983, four Commission officials. Luigi Casella, Enrico Osio, Cornelia Oud and Jan Robert de Rijk, were granted leave to intervene in the case in support of the applicant. By a further order of the Court (Second Chamber) of the same date, the Government of the Kingdom of Belgium was granted leave to intervene in support of the defendant.

4. Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.

II —. Conclusions of the parties

1. Declare his application admissible and well founded;

2. Consequently:

3. Order the defendant to pay the costs;

1. Declare the application unfounded; and

2. Order the applicant to pay the costs.

III —. Submissions and arguments of the parties

1. The applicant advances only one submission alleging disregard or infringement of:

2. The Commission objects that all the measures complained of by the applicant were adopted by the Belgian authorities and not by the Commission.

1. Whilst not questioning the admissibility of the application, the Commission contends that the conclusions set out therein are, in certain respects, inadmissible or extravagant because, as a matter of law and of fact, the Commission is altogether unable to take all the necessary steps to have the convertibility of the applicant's remuneration paid in convertible Belgian francs by the defendant restored to 100% with retroactive effect.... The Commission's powers are limited to ordering the sums capable of being made convertible to be transferred, and the rest is a matter for the Belgo-Luxembourg authorities and the banking authorities subject to their control.

2. Whilst acknowledging that the contested decisions of the Exchange Institute were not adopted by the Commission but by a Member State, the applicant points out that the Commission has, amongst other things, a duty to assist its officials and must ensure that inter alia the Protocol is respected. The applicant alleges that the contested decisions of the Exchange Institute concern him directly and are contrary to Community law and he claims to be entitled, by reason of that duty and obligation incumbent upon the Commission, to demand that it should use ill means at its disposal that are necessary to have those decisions annulled retroactively. Since the applicant considers that the Commission has not in fact usud all such means, he takes the view that his claim for an order requiring the Commission to take all the necessary steps to have the convertibility of his remuneration paid in convertible Belgian francs by the defendant restored to 100% with retroactive effect from 1 February 1982 is admissible whether or not he may also require it to use the ultimate means at its disposal, that is, an action for a declaration that a Member State has failed to fulfil its obligations.

A —. The legality of the new measures adopted by the Exchange Institute

(i). The applicant's arguments

(a). The applicant points out that Article 12 (c) of the Protocol provides that officials and other servants of the Communities are to be accorded in the territory of each Member State the same facilities in respect of currency or exchange regulations as are customarily accorded to officials of international organizations. As is shown inter alia by the situation prior to 21 December 1981, described above, those facilities imply that remuneration paid by the Community insitutions to their officials and agents in convertible Belgian francs must be freely convertible into foreign currencies.

(b). The applicant points out that Article 1 of the First Directive for the implementation of Article 67 of the Treaty requires Member States to grant all foreign exchange authorizations required for the conclusion or performance of transactions or for transfers between residents of Member States in respect of the capital movements relating inter alia to transfers of workers' savings during their period of stay. Moreover, the transaction in question are to be carried out on the basis of the exchange rate ruling for payments relating to current transactions, in other words at the official exchange rate, which is the exchange rate prevailing on the regulated market.

(c). The contested decisions of the Exchange Institute are contrary to the principle of equality in so far as they put officials and servants of the European Communities working in Belgium or Luxembourg on an unequal footing compared with Community nationals working for international organizations or foreign governments in countries other than Belgium or Luxembourg whose remuneration is subject to no exchange restrictions imposed by the competent authorities.

(d). Moreover, the decisions at issue result in unwarranted appropriation on the part of the Belgian State. The remuneration of officials and servants of the Communities comes from the Communities' own resources. By compulsorily and unilaterally changing convertible amounts into nonconvertible amounts pursuant to the Exchange Institute's decision of 21 December 1981, the Belgian authorities are performing an unlawful transaction at the expense of the European taxpayer.

(e). The applicant makes the final point that the aim of the Exchange Institute's decisions is to stop arbitrage transactions and that he is certainly not claiming to be entitled to carry out such transactions. However, the decisions are not confined to providing an appropriate technical solution to put a stop to arbitrage transactions in the strict sense of the term and it is certainly not necessary to derogate from the foreign status of officials and servants of the Community institutions. Consequently, the rules in question are contrary to the principle of proportionality.

(ii). Toe Commission's arguments

(a). As regards the arguments relied on by the applicant, the Commission denies that Article 12 (c) of the Protocol gives him the right to cany out arbitrage transactions. The fact that such a practice has been tolerated in the past certainly cannot give rise to any legal right since an official employed in Belgium or Luxembourg does not need to be able to cany out arbitrage transactions in order to cover current expenditure. Article 12 (c) of the protocol merely requires that an official whose country of origin is not Belgium or Luxembourg be able to transfer funds freely to his country of origin or another country by means of his convertible account.

(b). The Commission contends that the submission regarding the alleged infringement of Article 1 of the First Directive (Directive of the Council of 11 May 1960) for the implementation of Article 67 of the Treaty (as subsequently amended) is, in any case, irrelevant, since convertibility has been restored.

(c). The Commission points out that the European Monetary System applies in full to only six Member States, including Belgium and Luxembourg, which, moreover, apply it only to certain transactions. The Commission concludes that in those circumstances there is no uniformity in the system of transfer rates and therefore no unequal treatment of officials of the European Communities compared with Community nationals employed by international organizations and working in countries other than Belgium or Luxembourg.

(d). The Commission points out that the applicant's assertion that the Exchange Institute's decisions lead to an unwarranted appropriation on the part of the Belgian State has no bearing on the applicant's own personal situation.

(e). Finally, the Commission disputes that the rules in question are contrary to the principle of proportionality. On the contrary they seem to be consistent with the present legal situation in so far as they allow the free transfer of funds and total convertibility for all transactions for which those facilites are required.

B —. The Commission's duty of assistance

(i). The applicant's arguments

(ii). The Commission's arguments

1. Luigi Casella, Enrico Osio, Jan Robert de Rijk and Cornelia Oud request the Court to order the Commission to pay the costs of the intervention.

2. The Belgian Government states that, until the adoption of the Exchange Institute's first decision in December 1981, officials and servants of the Communities increased their income quite substantially by engaging in very simple arbitrage transactions involving the regulated market and the free market which were made possible by their access to convertible accounts. However, the purchase of foreign currency with Belgian francs on the regulated market for the sole purpose of making a profit was done at the expense of the foreign currency reserves of the Banque Nationale de Belgique and rendered measures to support the Belgian franc more difficult and more costly. Moreover, the arbitrage transactions resulted in officials' current expenditure on consumption in the territory of the Belgo-Luxembourg Economic Union being paid for by francs obtained from selling foreign currencies on the free market whereas that expenditure, in so far as it concerned imports, finally had to be met by Belgium through the country's foreign-exchange reserves, that is to say foreign currency bought on the regulated market.

IV —. Oral procedure

1. By an applications lodged at the Court Registry on 23 February 1983 Sandro Forcheri, an official of Italian nationality at the Commission of the Luiropean Communmes, brought an action for an order requiring the Commission to take all the necessary steps to have the convertibility of his remuneration restored to 100% with retroactive effect from 1 February 1982 and, secondly, the annulment of the implied decision rejecting his complaint of 29 July 1982 and, so far as is necessary, of the implied decision rejecting his request for assistance of 8 February 1982.

2. It should be recalled that there are two distinct exchange markets for the Belgian and Luxembourg franc, namely a regulated market on which the margins of fluctuation in relation to other currencies are maintained within certain limits as a result of the intervention of the central banks and a free market on which the rate is subject to the effect of supply and demand and there is no intervention on the part of the central banks. The exchange rates applicable on the two markets therefore move independently and the rates of foreign currencies on the free market are often higher than those on the regulated market. The relevant provisions specify for what transactions and under what conditions purchases or sales of currencies may or must be carried out on the regulated market or on the free exchange market.

3. Considering that the unreserved application of those provisions to officials of the Communities who were not or Belgian or Luxembourg nationality was not fair, the Belgian and Luxembourg authorities in the course of the 1970's set up a special system for those officials in the form of special convertible foreign accounts. Those accounts are distinguished, on the one hand, by the fact that only the salaries and allowances paid by the European Communities and sums transferred from other convertible accounts may be deposited in such accounts and, on the other hand, by the fact that they permit all exchange transactions to be effected on the regulated market.

4. Towards the end of 1981 the gap between the exchange rates on the regulated market and those on the free market widened and it became common practice for many officials to use the possibilities offered by the convertible accounts to effect arbitrage transactions in which they bought foreign currency on the regulated market and then immediately resold it on the free market, thereby making a profit in Belgian or Luxembourg francs based on the difference between the two rates. In order to stop that practice, on 21 December 1981 the Institut Belgo-Luxembourgeois du Change [Belgo-Luxembourg Exchange Institute, hereinafter referred to as the Exchange Institute] amended the existing system so that in future, in the absence of special authorization, only 25% of sums paid as salary or allowances could be credited to the special convertible accounts which placed a corresponding limitation on the possibility for officials to buy foreign currency freely on the regulated market.

5. Following the adoption of those measures, the Community institutions received numerous requests for assistance from their officials and then complaints submitted under Article 90 of the Staff Regulations. For their part, the institutions made representations to the Exchange Institute to have the possibility for officials of other than Belgian or Luxembourg nationality to have all their salary and allowances paid into a convertible account restored.

6. On1 June 1982, after negotiations witn the Community institutions, the Exchange Institute published a circular stating that such officials were once more authorized to have all their salary and allowances credited to a special convertible foreign account, provided, however, that they signed a declaration — which had to be countersigned by the institution employing them — in which the holder of the convertible account:

7. If holders of convertible accounts do not sign that undertaking, they remain subject to the rules laid down on 21 December 1981 described above.

8. On 8 February 1982, the applicant, taking the view that the rules laid down on 21 December 1981 were unlawful and adversely affected his status as, an official of the European Communities, requested the Commission for assistance under Article 24 of the Staff Regulations. He never received a reply to his request.

9. Considering that the undertaking proposed in the Exchange Institute's, circular of 1 June 1982 was unacceptable, that the alternative procedure was still unlawful and that the Commission had not responded satisfactorily to his request for assistance, the applicant also refused to sign the undertaking and on 29 July 1982 lodged a complaint under Article 90 (2) of the Staff Regulations. Having received no reply to that complaint either, he brought the present action.

10. Before the Court the applicant argued that the measures adopted by the Exchange Institute on, 21 December 1981 and 1 June 1982 constituted infringements by the two Member States concerned of Article 67 of the EEC Treaty and of the directives adopted for the implementation of that article. He further argued that those measures adversely affected the facilities accorded to officials of the Communities in respect of currency or exchange regulations under Article 12 (c) of the Protocol on the Privileges and Immunities of the European Communities, Finally, he argued that the measures were contrary to the principles of equality and distributive justice.

11. He contends that, confronted with that unlawful situation adversely affecting the status of its officials, the Commission did not take the steps which were necessary. It thus failed to fulfil, on the one hand, its duty to assist officials and consider their welfare, laid down inter alia in Article 24 of the Staff Regulations, and, on the other hand, its duties as guardian of the Treaty.

12. In view of those arguments it must be pointed out in the first place that in an action brought by an official under Article 179 of the EEC Treaty the Court cannot determine whether or not a Member State has failed to fulfil, one of its obligations under the Treaty or rule whether the Commission has properly discharged the supervisory duties incumbent upon it under inter alia Article 155 of the EEC Treaty. In the present, case therefore, it is solely a question of deciding whether the Commission, as the appointing authority, has tailed in its duty to provide assistance to an official who is alleging that a Member State infringed the rights conferred on him in the interests of the Communities by his status as an official. It is only in view of that question that it may possibly be necessary to examine the national measures first.

13. The second point which must be made is that, after the first measures were adopted by the Exchange Institute in December 1981, the Commission, together with the other Community institutions, immediately made representations to the Exchange Institute in order to have those measures replaced by others which, whilst putting an end to the improper use of special convertible accounts which enabled officials to enjoy an unjustified advantage by carrying out arbitrage transactions, would still make it possible for them to buy on the regulated market all the foreign exchange needed to cover their expenditure outside the Belgo-Luxembourg Economic Union. It was as a result of that action that the Exchange Institute, by its circular of 1 June 1982, introduced the present system which once again enables officials of other than Belgian or Luxembourg nationality to have all their remuneration and allowances paid into a special convertible account provided only that they comply with the obligations set out in a signed declaration.

14. As the applicant himself has admitted in the course of the proceedings before the Court, this action in fact raises only one question, namely whether the Commission was under a duty to pursue its efforts to persuade the Belgian and Luxembourg authorities to withdraw or amend the declaration to be signed by officials. In order to answer that question, it is sufficient to examine the applicant's objections regarding the text of that declaration.

15. Those objections concern the obligation to sell to an approved bank at the rate prevailing on the regulated market all remuneration paid in foreign currency and to abstain not only from arbitrage transactions in the strict sense of the term but also from other currency transactions with the aim of procuring funds to cover current expenditure within the territory of the Belgo-Luxembourg Economic Union. Lastly, the applicant contends that, as a Community official, he cannot be subject to the control of the Exchange Institute.

16. As regards the first two obligations, it should first be pointed out that Article 63 of the Staff Regulations provides that an official's remuneration is to be paid in the currency of the country in which he performs his duties, in the applicant's case, therefore, in Belgian francs. The only exceptions to that rule are laid down in Article 17 of Annex VII to the Staff Regulations which provides that an official receiving the expatriation allowance may transfer part of his emoluments through the institution which he serves either in the currency of the Member State of which he is a national or in the currency of the Member State of which either his own domicile or the place of residence of a dependent relative is located.

17. Secondly, the Court must take formal notice of the statements made during the proceedings before the Court by the Belgian Government, intervening in support of the Commission. It is clear from those statements that the obligation to sell foreign currency to an approved bank does not apply at all to the part of emoluments transferred through the institution pursuant to the aforementioned Article 17 and that the right to purchase foreign currency on the regulated market extends to all means of payment, needed to cover an official's expenditure outside the territory of the Belgo-Luxembourg Economic Union, including gifts.

18. It must therefore be held that, by the measures adopted on 1 June 1982, the Belgian and Luxembourg monetary authorities, acting in accordance with the spirit of the Protocol on Privileges and Immunities, fully restored the possibility for officials of other than Belgian or Luxembourg nationality to purchase on the regulated market all the foreign currency needed to cover their expenditure outside the territory of the Belgo-Luxembourg Economic Union, on the sole condition that they abstain from all currency transactions designed' to increase the value in Belgian or Luxembourg francs of means of payment intended to cover their expenditure within the territory of the Belgo-Luxembourg Economic Union and that they be subject to the control of the monetary authorities in that regard. It is by no means possible for that condition to affect officials in such a way that the interests of the Communities are harmed.

19. In those circumstances, it cannot be maintained that the Commission has failed in its duty to assist its officials by not objecting to the measures adopted by the Exchange Institute on 1 June 1982. The application must, therefore, be dismissed.

20. Article 69 (2) of the Rules of Procedure provides that the unsuccessful party is to be ordered to pay the costs. However, under Article 70 of the Rules of Procedure, Community institutions are to bear their own costs in proceedings brought by servants of the Communities. The officials Luigi Casella, Enrico Osio, Jan Robert de Rijk and Cornelia Oud, who intervened in support of the applicant, and the Belgian Government, which intervened in support of the Commission, must bear their own costs.

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

1 Dismisses the application;

2 Orders the parties, including the interveners, to bear their own costs.