Report for the Hearing delivered in Case 286/83

I — Facts and procedure

1. The applicants are members of the staff of the European Association for Cooperation (hereinafter referred to as the EAC), a non-profit-making association created under the Belgian Law of 25 October 1919, as amended by the Law of 6 December 1954, and which was granted legal personality by the Royal Decree of 15 September 1964. They perform the duties of delegates, advisers or members of Commission delegations in developing countries linked to the Community by cooperation agreements, or they perform technical assistance or cooperation duties on behalf of the Commission.

2. The applicants are members of the overseas staff of the EAC and consider, together with certain members of the other two categories of staff of the EAC, namely the headquarters staff (see Joined Cases 87 and 130/77, 22/83 and 9 and 10/84 [1985] ECR 2523) and the EAC staff seconded to the Commission (see Joined Cases 66 to 68 and 136 to 140/83 [1985] ECR 2459), that the EAC is a fictitious entity or, at very least, is only the apparent employer of its staff, the real employer being the Commission.

3. On the basis of that argument, the applicants, by letter of 7 June 1983, submitted a complaint under Article 90(2) of the Staff Regulations of Officials of the European Communities seeking the annulment of the decision adopted by the President of the Commission on 11 March 1983 refusing to establish the applicants as officials with effect from the date of their engagement by the EAC. That complaint was expressly rejected in a letter of 11 October 1983 from Mr Burke, a Member of the Commission, which pointed out that the contract between the applicants and their employer had been concluded with the EAC, an association having independent legal personality, and stated that the complaint could not be regarded as a complaint through administrative channels.

4. In view of that letter, the applicants brought the present action, which was received at the Court Registry on 21 December 1983.

5. Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court (Second Chamber) decided to open the oral procedure without any preparatory inquiry. By decision of 12 October 1988 the case, which had originally been assigned to the Second Chamber, was reassigned to the Fourth Chamber.

II — Conclusions of the parties

The applicants claimed in their application that the Court should:

The applicants claimed additionally in their reply that the Court should:

The Commission contends that the Court should:

Dismiss the applications;

Make an appropriate order as to costs.

III — Summary of the submissions and arguments of the parties

Since the Court has been asked to rule first on whether in fact or in law the EAC has legal personality and then on whether it has jurisdiction to hear this case before reaching any decision on the legal submissions, it will summarize the various arguments in that order.

A— The nature of the EAC

The applicants' fundamental argument is that the EAC is a fictitious entity or at least is only the apparent employer of its staff, the real employer being the Commission. In the applicants' view, that argument follows from two series of factors.

First series of factors: the Statute of the EAC shows that it is, in reality, an administrative unit of the Commission

In their application, the applicants rely firstly on the fact that the EAC does not have any assets of its own and there has been no contribution in the sense of goods or activities placed under common control.

The EAC is included in the detailed list of posts for the Commission's Directorate-General VIII (Development) and, since 1977, has been directly attached to the administrative unit dealing with finance and administration, which has recently become the Finance Directorate of Directorate-General VIII.

The Administrative Board of the EAC is exclusively composed of officials of the Commission. Its director and, by virtue of Council Regulation No 3332/82 of 3 December 1982 laying down special transitional measures for the recruitment as officials of the European Communities of 56 members of the staff of the headquarters of the European Association for Cooperation (Official Journal 1982, L 352, p. 5), the headquarters staff is entirely composed of officials of the Commission.

Furthermore, the EAC's operating costs are charged to the Commission's budget.

An additional fact in the applicant's view is that the EAC is entrusted with important responsibilities which in fact form part of the powers of the Commission. The Commission may delegate its powers only to an internal body or to a body established under Community law over which it can exercise supervisory authority and which can be set up only by the Council. In the absence of such a measure, the EAC, if its existence is not to be regarded as illegal, must be regarded as an internal body.

In its defence, the Commission refers to the proposal for a regulation submitted by the Commission to the Council relating to the creation of a European Agency for Cooperation which summarizes the various stages in the development of cooperation policy and the reasons which led to the setting up of a new instrument for the management of that policy, namely the European Agency for Cooperation (Council Regulation No 3245/81 of 26 October 1981, Official Journal 1981, L 328, p. 1). The applicants' argument takes no account of the historical context in which the EAC was set up.

Furthermore, the Commission points out that, as a non-profit-making association incorporated under Belgian law, the EAC's object, according to the first paragraph of Article 3 of the EAC Statute, is to facilitate the joint efforts made by the European Communities and the developing countries, territories and overseas departments associated therewith by implementing more effectively the means of cooperation and scientific and technical supervision necessary for the economic and social development of such States, countries, territories and overseas departments. It is not therefore necessary, in order to be properly constituted, that such an association have assets contributed by founder members and other members.

The purpose of referring to the EAC in the detailed list of posts is to designate the persons responsible for maintaining contact between the Commission and the EAC.

The fact that the members of the Administrative Board and the Director of the EAC are almost all officials of the Commission is legally irrelevant. Under the Statute, neither the Director nor the members of the Administrative Board have to be officials or servants of a Community institution (Articles 15 and 25). They perform their duties in their own name.

Similarly, it is of little importance that the EAC budget is financed from the Commission's budget.

In reply to those arguments, the applicants state that the Commission cannot employ persons in posts subject to its authority on the basis of any kind of contract it wishes and thereby create systems arbitrarily. They refer to a note for the attention of the members of the Commission (a memorandum from Mr Tugendhat) following a note from Carlo Facini dated 17 June 1977 which stated that the categories of staff of the institutions are defined in the Staff Regulations and the Conditions of Employment of Other Servants, which are exhaustive in this regard, with the result that no employment relationship may be established outside the provisions therein contained.

With regard to the development of cooperation policy, the applicants emphasize that the setting up of the European Agency for Cooperation shows that the Commission had become aware that the EAC and the measures adopted by it were unlawful.

With regard to the legal status of the EAC, the applicants state that placing goods or activities under common control constitutes an essential element of any association. They contend, and cite legal writers in support of their argument, that the EAC does not meet the requirements of the Belgian law governing associations. Furthermore, the tasks entrusted to the EAC by the Convention of 13 July 1965 between the Commission and the EAC (Annex 3 to the defence) in no way correspond to those provided for in the said law since the Commission is using the EAC to pursue political objectives. The Commission itself considered it necessary to assimilate the EAC to an administrative unit by including it in the detailed list of posts for Directorate-General VIII in 1976.

The applicants base an argument on the fact that the EAC's auditor must be an official (Article 29 of the EAC Statute) and' that, if the association is wound up, the net proceeds of the liquidation are to be assigned to the Commission (Article 32 of the EAC Statute).

With regard to the EAC budget, the applicants emphasize that the EAC does not receive a subsidy but that all the funds necessary both for its internal purposes and for payment of the salaries and allowances of the overseas staff are placed at the disposal of the EAC. Moreover, at the end of each financial year, any part of the credit allocated by the Commission to the EAC which has not been spent belongs to the Commission and not the EAC.

It is the Commission which selects candidates for employment by the EAC. It can be seen from Article 4 of the Convention of 13 July 1965 and from an EAC document (Annex 8 to the reply) that the EAC has no say in the choice of experts or specialists or in the definition of their duties.

The applicants refer to two further factors, namely a letter of 8 February 1977 from Director-General Krohn to the Permanent Representative of the Federal Republic of Germany and a letter dated 10 April 1982 from Mr Pisani to Mr Posser, Minister for Finance of the Land Nordrhein-Westfalen. That correspondence shows that the Commission regarded the EAC as one of its own internal bodies.

In its rejoinder, the Commission contests the applicants' analysis. It reiterates the various stages in the development of the cooperation policy and the need which arose to create instruments adapted to the new needs. After the first Lomé Convention entered into force, the general increased role of cooperation gave rise to the need to establish the European Agency for Cooperation on the basis of Article 235 of the EEC Treaty. In the Commission's view, it was only following upon the various Lomé Conventions that it became apparent that it was inappropriate to entrust to a legal person governed by private law tasks which because of the qualitative and quantitative development of cooperation policy were a matter for a public-law body.

With regard to the applicants' argument to the effect that the Commission may only employ officials, temporary servants or auxiliary servants in posts subject to its authority, the Commission replies that that argument is irrelevant to the present case inasmuch as the applicants are all employees of a legal person incorporated under Belgian law, namely the EAC. In the Commission's view, it follows that the documents which the applicants are seeking to have produced are irrelevant.

In reply to the argument that the EAC does not meet the requirements of Belgian law, the Commission merely points out that the fact that the EAC was granted legal personality by the Royal Decree of 15 December 1964 constitutes proof that the EAC fulfils all the conditions required by the Belgian law in question. The Commission quotes legal writing on the subject to show that it is not necessary for the EAC to have assets contributed by its members.

With regard to the fact that EAC is mentioned in the detailed list of posts for Directorate-General VIII and to the internal memorandum referred to by the applicants, the Commission protests at the use of its internal documents by thiru parties in court proceedings. It does not dispute that the EAC was treated as an administrative unit but asserts that that is of limited significance inasmuch as a very clear distinction was drawn between questions concerned with personnel policy, which were exclusively matters for the Commission, and the management of i iät personnel, which was for the EAC.

The fact that the directors and members of the Administrative Board of the EAC were officials does not serve in the Commission's view to transform the EAC from a private legal entity into a public legal entity. The explanation for Articles 29 and 32 of the EAC Statute, to which the applicants refer, is that the EAC obtains most of its resources from public subsidies.

With regard more particularly to those resources, the Commission points out that since March 1980, all of the EAC's funds stem from a subsidy provided for in Title 9 of the General Budget (Cooperation with developing countries and nonmember States), forming part of the operating appropriations in that budget, and not in Title 1 (Expenditure relating to persons working with the institution). It claims that the fact that a private legal entity functions only by virtue of the generosity of the public authorities is not sufficient to give that person public-law status. The EAC's obligation to reimburse any part of that subsidy which has not been spent does not make any difference.

With regard to the selection of experts or specialists, the Commission observes that it is correct that the EAC takes no part either in the choice of those persons or in the definition of their duties. The EAC's role is to submit a list of candidates and to recruit into its service the candidates chosen by the Commission.

The Commission contends that the diplomatic correspondence between the Commission and Germany is confidential. The passages quoted, read in context and in the light of the purpose of that correspondence, do not show that the EAC was, dejare, an internal Commission body.

Second series of factors: the position of the EAC staff shows that the EAC is only a fictitious entity

In their application, the applicants state thai the fact that they are described as Commission delegates indicates clearly that they are servants of the Commission. The duties of delegates and, by implication, of other staff of the delegations is defined in conventions and agreements concluded under public international law and in the internal rules of the Community.

That is also borne out by the fact that the Commission's officials and the overseas staff of the EAC are interchangeable, the growth of new responsibilities entrusted to the delegations and the obligation imposed on the overseas delegations by the Commission to comply with the provisions of its Security Guide.

Moreover, the salaries paid to EAC staff are exclusively subject to Community tax since the EAC pays the tax due by its employees to their country of origin and the country in which they are resident for tax purposes, or both. The decisions of the Council concerning the weighting of salaries and its decision to institute an exceptional levy, called the crisis levy, are directly applicable to the applicants.

In the applicants' view, Regulation No 3332/82, which provides that members of the EAC's headquarters staff recruited as officials are to be appointed to the grade and step indicated in a table of equivalence and that seniority in step is to be that acquired in the service of the EAC, also shows that they must be regarded as officials.

In its defence, the Commission refers first to the EAC Statute and to the Convention of 13 July 1965 between the EAC and the Commission in order to draw attention to the fact that the overseas staff of the EAC is employed under temporary, individual contracts. The general terms of those contracts and a code of disciplinary rules were adopted by the Administrative Board of the EAC, which shows that the overseas staff cannot be assimilated to employees of the Commission.

The title Commission delegate is used because the staff concerned are required, on the basis of a contractual obligation to the EAC, to carry out tasks directly assigned to them by the Commission.

Contrary to what is alleged by the applicants, the overseas staff are in fact recruited by the EAC, which, of course, liaises with the Commission. Although the Commission may indeed modify the duties to be carried out, any change in the conditions of employment under the contract gives members of staff the right to terminate unilaterally their contract with the EAC.

With regard to reimbursement by the EAC of income tax and the imposition of the exceptional levy called the crisis levy, the Commission considers that those measures are designed to ensure a general harmonization of the remuneration of overseas staff. However, the crisis levy is not in the nature of a Community tax.

The Commission emphasizes that Council Regulation No 3332/82 applies only to the EAC headquarters staff, that those persons have been recruited as probationer officials and that their recruitment was possible only by virtue of a regulation derogating from the provisions of the Staff Regulations of Officials.

Finally, the Commission observes that there are major differences between the legal position of the EAC's overseas staff and that of the Commission's staff. The contracts of employment of the EAC's overseas staff are subject to the binding provisions of the Belgian Law of 3 July 1978 on contracts of employment and any disputes arising therefrom fall within the jurisdiction of the labour courts of the place in which the EAC has its headquarters. Furthermore, in certain cases EAC staff enjoy more favourable conditions in regard to expatriation allowances, overseas service allowances, housing allowances and the reimbursement of medical expenses, and less advantageous conditions essentially in regard to pensions.

The applicants reply to the Commission's argument by stating that the Commission is relying on purely formal considerations which undermine their argument that the only legal relations of which account must be taken are those between the Commission and the applicants. That argument is supported by the fact that the applicants participate in European political cooperation meetings and that they receive from the Commission the mandate defining their tasks. They also refer to the proposal for a regulation submitted by the Commission on 9 March 1978 and to an internal memorandum of the Commission dated 3 July 1981 showing that the Commission itself considered that it was unacceptable that the cooperation policy be managed by a body incorporated under private law.

With regard to the differences between the legal position of the EAC staff and that of the Commission's staff, the applicants deny that their contracts of employment are governed by private law. The differences in the conditions of employment are due, according to the applicants, either to the unilateral wishes of the Commission or to the fact that, in the nature of things, overseas service gives rise to special problems.

The Commission, in its rejoinder, emphasizes that the applicants were informed that they were entering into a contract with a person incorporated under Belgian private law but accepts that it became difficult to reconcile their duties with their status as employees of a private legal entity. At its meeting of 5 December 1984, the Commission itself accepted the principle of establishing the EAC staff working in the delegations (except for the technical assistants) and entrusted its departments with the task of carrying out a more detailed analysis of the situation with a view to changing the rules accordingly. The Commission has recognized for many years that the delegates are entrusted with responsibilities and tasks relating to the representation of the public authorities. But that does not alter the fact that, until the system is revised, the staff in question remain employed by a body incorporated under Belgian private law. The Commission observes that the applicants' contentions do not bear out their fundamental argument. Neither the fact that officials are seconded to the EAC, nor the interchangeability between EAC and Commission staff, nor Regulation No 3332/82, nor the tax system prove that the EAC is a fictitious entity.

With regard to the major differences between the applicable legal rules, the Commission states that there is no reason why the applicants should not be appointed officials or servants of the European institutions but that that could take place only after amendment of the Staff Regulations or the Conditions of Employment of Other Servants or as a result of measures adopted under Article 14 of Regulation No 3245/81. Such appointments would give rise to many problems and would require detailed examination.

B — The Court's lack of jurisdiction

The Commission contends that the Court has no jurisdiction to hear the present case inasmuch as the Commission contests that the applicants are officials or servants of the Communities.

With regard to appointment and establishment as an official by the Commission, it follows from the judgment of the Court of 13 May 1970 in Case 18/69 Foumier v Commission [1970] ECR 249 that the Commission has no power to appoint or establish staff other than in accordance with the requirements and procedures laid down by the Staff Regulations. As the Court decided in its judgment of 15 December 1966 in Case 62/65 Serio v Commission [1966] ECR 561, even if those requirements were fulfilled, that would not give rise to a right infringement of which would be sanctioned by an order of the Court requiring the Commission to appoint or employ the applicants as officials or temporary servants.

In the Commission's view, the applicants cannot be regarded as temporary servants. They were never engaged by the Commission and consequently, were never assigned to a post appearing in the list of posts appended to the budget (condition required by Article 2, in particular Article 2(a) and (b), of the Conditions of Employment of Other Servants and by the judgment of the Court of 1 February 1979 in Case 17/78 Deshormes v Commission [1979] ECR 189, at p. 203).

Although the Court may annul disputed measures or award damages, it does not have the power to substitute its own decision for that of the competent administrative authority and appoint the applicants as officials or engage them as temporary servants; a fortiori it does not have the power to grant them a hybrid legal status based partly on the provisions most favourable to them in the Staff Regulations and the Conditions of Employment of Other Servants and partly on the maintenance of the present provisions.

The applicants contest the objection to the Court's jurisdiction. They point out that it was decided in the judgment of the Court of 11 March 1975 in Case 65/74 Porrini v EAEC and Cornant [1975] ECR 319 that the ECSC Treaty applies not only to persons who have the status of officials or servants but also to persons claiming that status. That principle applies equally to Article 179 of the EEC Treaty. The Court, without itself making an appointment, may require the Commission or the Council to adopt appropriate measures, as can be seen from the judgment of the Court of 15 December 1982 in Case 737/79 Battagliai Commission [1979] ECR 4497.

C — Legal submissions on the substance of the case

The applicants put forward three submissions in their application and a fourth submission in their reply.

First submission: breach of the principle of equal treatment

The applicants claim that they are officials or, at very least, servants of the Commission but that that status has not been granted to them nor have all the provisions of the Staff Regulations of Officials or the Conditions of Employment of Other Servants of the Communities been applied to them, particularly in regard to pensions. The applicants draw attention to the establishment of 32 members of the EAC staff seconded to Directorate-General VIII and of 56 members of the EAC's headquarters staff. There is obvious discrimination in favour of those employees and against the applicants. It can be seen from the judgment of the Court of 31 May 1979 in Case 156/78 Newth v Commission [1979] ECR 1941 that the principle of equality among officials is a superior rule of law and is binding even to the point that it may require that no account be taken of the existence of a formal text.

The applicants' wish to maintain the advantages they have acquired corresponds to the special characteristics of their duties. Furthermore, those advantages were granted by the Commission itself for those compelling reasons.

In the view of the Commission, that submission begs the question and presupposes that the applicants are officials or servants of the Communities. However, nothing could be further from the truth. The Commission questions the legal basis on which the applicants purport to require that they be established or engaged as temporary servants while maintaining all the conditions which are more favourable to them than those under the Staff Regulations or the Conditions of Employment of Other Servants. Since the members of the EAC headquarters staff were appointed probationer officials because a regulation derogating from the provisions of the Staff Regulations was adopted and because the corresponding posts existed, the principle of equality would have been breached only if not all the members of staff falling into that category were able to benefit from the derogation.

The case-law relied on by the applicants is, in the Commission's view, not applicable to this case. Since the applicants are neither officials nor temporary servants, they cannot rely on Regulation No 3332/82. The Council is under no legal obligation to adopt a similar regulation in favour of all the members of the EAC staff. However, the Commission points out that it has declared itself in favour of establishing the EAC staff in the delegations other than the technical assistants.

Second submission: infringement of the rules and principles of distributive justice

The applicants allege that although they are in the service of the European Communities in the same way as officials or, in the alternative, other servants, they do not have the benefit of all the rules that apply to those categories. The applicants claim that, from the time of their recruitment, their status could not legally be different from that of persons who were either officials or other servants and performed their duties under the same conditions as the applicants.

In the view of the Commission, distributive justice is a moral virtue and the extent to which it can be required in law depends on the extent to which its requirements are taken into account in legal provisions proper or in the general principles of law. If the applicants' argument is correct, it would have to be accepted that any person who can show that he pursues an activity connected with the Communities must ipso facto be regarded as an official or a temporary servant, and that would lead to the total abolition of all the distinctions provided for between officials, temporary servants, members of the auxiliary staff and local staff.

Third submission: infringement of the rules and principles of sound administration

In this submission, advanced by the applicants in the alternative, it is alleged in particular that the EAC made deductions from the applicants' salaries in respect of Community tax but that those deductions were not shown as revenue in the Commission budget. That constitutes a breach of budgetary principles and therefore of the principles of sound administration. Moreover, the applicants contend that no justification is given for those deductions in so far as they are not the subject of any statement under the tax systems of the countries in which the applicants pursue their activities.

The Commission replies that the overseas staff of the EAC is indeed in principle subject to the applicable national tax systems. The EAC makes a standard and definitive deduction from the applicants' monthly salary and keeps the product of that deduction, which is not therefore entered in the Commission budget as revenue. That is perfectly normal because it is the EAC and not the Commission which is responsible for reimbursing the national income tax which the applicants are liable to pay on their EAC salary under the legislation of their country of origin, the country in which they are employed and/or the country in which they have maintained a residence for tax purposes. That is done for the purposes of establishing equality between all the members of staff. Moreover, the Commission does not see how that submission could lead to the annulment of the decision in question and contends that the applicants do not have the requisite legal interest to rely on such a submission.

Fourth submission:

In their reply, the applicants put forward a new submission alleging that the tasks and responsibilities of the EAC are not included in the exhaustive list to be found in the title of the Belgian Law of 25 October 1919.

The Commission contests the admissibility of this new submission on the ground that the applicants are not in the situation provided for in Article 42(2) of the Rules of Procedure of the Court. The object of the EAC is defined in Article 3 of its Statute, which was duly published in the Moniteur belge of 3. 10. 1964, as was the Royal Decree of 15 December 1964 in which the executive branch of the Belgian State granted the EAC legal personality.

The applicants have long been aware of the object of the EAC and the means employed to carry it out. Thus, no new matters came to light in the course of the written procedure.

The Commission also contends that the Court has no jurisdiction to rule on this submission. A dispute on that subject is exclusively a matter for the Belgian courts. Finally, and very much in the alternative, the defendant contends that the submission is unfounded.

1 Language of the case: French.