JUDGMENT OF THE GENERAL COURT (Appeal Chamber)

10 November 2010

Case T-260/09 P

Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM)

v

Manuel Simões Dos Santos

(Appeal — Cross-appeal — Civil service — Officials — Promotion — 2003 promotion procedure — Merit points reset at zero and their total recalculated — Compliance with a judgment of the General Court — Res judicata — Legal basis — Non-retroactivity — Legitimate expectation — Material damage — Loss of opportunity for promotion — Non-material damage)

Appeal: against the judgment of the Civil Service Tribunal of the European Union (First Chamber) of 5 May 2009 in Case F-27/08 Simões Dos Santos v OHIM [2009] ECR-SC I-A-1-113 and II-A-1-613, seeking to have that judgment set aside. Cross-appeal by Mr Simões Dos Santos.

Held: Paragraphs 2 to 5 of the operative part of the judgment of the Civil Service Tribunal of the European Union (First Chamber) of 5 May 2009 in Case F-27/08 Simões Dos Santos v OHIM [2009] ECR-SC I-A-1-113 and II-A-1-613, are annulled. The main appeal and the cross-appeal are dismissed as to the remainder. The case is referred back to the Civil Service Tribunal.

Summary

1.      Officials — Promotion — Adoption of a new promotion system — Withdrawal of merit points acquired under the previous system — Breach of the principles of non-retroactivity, protection of legitimate expectations and legal certainty

(Staff Regulations, Art. 45)

2.      Officials — Promotion — Adoption of a new promotion system — Withdrawal of merit points acquired under the previous system — Necessity for an express, precise and unambiguous legal basis

(Staff Regulations, Arts 45, 90 and 91)

3.      Officials — Promotion — Adoption of a new promotion system — Withdrawal of merit points acquired under the previous system — Official with a high balance of merit points because of his considerable seniority

(Staff Regulations, Art. 45)

4.      Actions for annulment — Judgment annulling a measure — Effects — Obligation to implement

(Art. 233, para. 1, EC)

5.      Officials — Actions — Unlimited jurisdiction — Defendant institution automatically ordered to pay compensation where damage caused by maladministration

(Staff Regulations, Art. 91(1))

6.      Officials — Actions — Unlimited jurisdiction — Scope — Limits — Observance of the principle that the parties have the right to be heard

(Staff Regulations, Art. 91(1))

7.      Officials — Actions — Unlimited jurisdiction — Compensation for material damage in terms of loss of opportunity — Assessment — Criteria

(Staff Regulations, Art. 91(1))

1.      The principles of non-retroactivity, legal certainty and the protection of legitimate expectations cannot be extended to the point of altogether preventing a new rule from applying to the future effects of situations which arose under the earlier rule. However, substantive rules must be interpreted as applying to situations existing before their entry into force only in so far as it clearly follows from their terms, objectives or general scheme that such an effect must be given to them. Similarly, those principles prevent the temporal scope of a measure of the Union from starting on a date prior to its publication, save, in exceptional cases, where the objective to be achieved so requires and where the legitimate expectations of those concerned are duly observed. Furthermore, in order not to render entirely redundant remedies which allow a party to claim before the Union courts that a contested measure infringed the principles of non-retroactivity, legal certainty and the protection of legitimate expectations, the objective justifying the retroactivity of a measure of general application must not be exhausted in the retroactive effect of that measure as such, which can only be one of its effects, nor must it merely reflect the desire of the author of the later measure to rectify, retroactively, an omission in the initial measure.

While the Office for Harmonisation in the Internal Market (Trade Marks and Designs) is entitled, in exercising its discretion in the implementation and modification of the assessment and promotion system for officials, to choose not to take equal account of all merit points allocated under the previous system, the Office cannot rely on the objectives pursued by the reform of that system, which are to remedy weaknesses in the system resulting from the allocation of excessive merit points on the basis of extremely lengthy seniority rather than the current merits of the official in question, when it fails to explain the reasons why it was not possible, instead of retroactively cancelling the merit points from the previous system, to convert them, with immediate effect, into merit points under the new assessment and promotion system without compromising those objectives In such a case, the aim of eliminating weaknesses in the previous assessment and promotion system does not in itself constitute an adequate objective such as to justify the retroactive application of a decision to withdraw merit points already acquired.

Furthermore, such a decision constitutes a breach of the legitimate expectations of the official in question, when he might legitimately expect, pursuant to a judgment annulling the decision to withdraw points for want of a legal basis, that the balance of merit points he had acquired under the previous system would not be withdrawn retroactively, without prejudice to any immediate or future change in that balance.

(see paras 48, 52, 54, 60, 62-63)

See: 99/78 Weingut Decker [1979] ECR 101, para. 8; C-368/89 Crispoltoni [1991] ECR I-3695, para. 17; C-334/07 P Commission v Freistaat Sachsen [2008] ECR I-9465, paras 43 and 44; C-256/07 Mitsui & Co. Deutschland [2009] ECR I-1951, para. 2 and the case-law cited therein; T-435/04 Simões Dos Santos v OHIM [2007] ECR-SC I-A-2-61 and II-A-2-427, para 100; T-380/06 Vischim v Commission [2009] ECR I-3911, para. 82 and the case-law cited therein

2.      Internal rules adopted by an institution or agency of the Union concerning the implementation of a new system for the assessment and promotion of officials and providing for the withdrawal of merit points acquired under the previous assessment and promotion system must contain a specific rule providing a legal basis for achieving the objective of the reform of that system, that is to say, an express and sufficiently clear and precise rule intended to eliminate the merit points accumulated by officials of that institution or agency under the previous system.

The absence of such a legal basis constitutes an illegality which cannot be remedied by a subsequent measure with retroactive scope.

Such an absence is not merely a formal defect that can be rectified retroactively by means of an interpretative act, but constitutes a serious and irreversible illegality which infringes the principles of legality and legal certainty. Furthermore, if it were otherwise, the effect of remedies seeking the annulment of a measure or a finding of illegality for want of a legal basis would no longer be guaranteed, given that the institution or agency in question could retroactively disregard the effects of such an annulment or finding of illegality and thus establish a legal position in the past as if that serious and irreversible illegality had never been committed, which would be tantamount to allowing it to alter a posteriori the purpose of the action which led to the annulment or finding of illegality. That is particularly true where the lawfulness of the general rules which are supposed to constitute the legal basis for the annulled measure is not, as such, called into question in an action against that measure and, consequently, by a decision of the General Court.

Moreover, even if the absence of a legal basis does merely constitute a formal defect, an annulling judgment based on such a defect includes a finding of illegality which dates back to when the annulled measure took effect, without prejudice to the possibility that the procedure for replacing such a measure may be resumed at the very point at which the illegality occurred, and the possibility that preparatory measures adopted previously may be lawful. However, it does not follow from those principles that a measure adopted subsequently for the purpose of replacing the measure annulled because of the formal defect is capable of rectifying that defect retroactively.

(see paras 56, 57, 59, 71-72)

See: C-238/99 P, C-244/99 P, C-245/99 P, C-247/99 P, C-250/99 P to C-252/99 P and C-254/99 P Limburgse Vinyl Maatschappij and Others v Commission [2002] ECR I-8375, paras 72-75; judgment of 29 November 2007 in C-417/06 P Italy v Commission, not published in the ECR, paras 51-53; Simões Dos Santos v OHIM, paras 139-146

3.      In the context of internal rules adopted by an institution or agency of the Union concerning the implementation of a new system for the assessment and promotion of officials, a decision with retroactive effect providing for the withdrawal of merit points acquired under the previous system cannot be justified, in accordance with the principle of equal treatment, in respect of an official who was the only one to have a particularly high balance of merit points because of his considerable seniority, and who was the only one to have repeatedly brought proceedings in order to preserve that balance.

In those circumstances, the Office for Harmonisation in the Internal Market (Trade Marks and Designs) is not justified in claiming that such an official was in a similar or identical situation to that of the Office’s other officials, potentially giving rise to unequal treatment to the detriment of those other officials.

(see para. 61)

4.      In order to comply with a judgment of annulment and implement it fully, the institution from which the annulled measure originates is required to have regard not only to the operative part of the judgment but also to the grounds which led to the judgment and constitute its essential basis, in so far as they are necessary to determine the exact meaning of what is stated in the operative part. It is those grounds which, on the one hand, identify the precise provision held to be illegal and, on the other, indicate the specific reasons which underlie the finding of illegality contained in the operative part and which the institution concerned must take into account when replacing the annulled measure.

Furthermore, the institution concerned is required under Article 233 EC to ensure that any act intended to replace the annulled act is not affected by the same irregularities as those identified in the judgment annulling the original act. Those principles apply a fortiori where the judgment of annulment has acquired the force of res judicata.

The purpose of the action for annulment and the effect of the first paragraph of Article 233 EC would be considerably compromised, or even deflected, if the institution whose measure has been annulled, instead of taking the steps required to comply with the Court’s judgment and rectifying the illegality committed, were authorised to change, with retroactive effect, the legal basis of that measure in order to achieve an outcome corresponding to that sanctioned by the Union judicature.

(see paras 70, 72)

See: 97/86, 99/86, 193/86 and 215/86 Asteris and Others v Commission [1988] ECR 2181, para. 27; C-310/97 P Commission v AssiDomän Kraft Products and Others [1999] ECR I-5363, paras 54 and 56; C-8/99 P Gómez de Enterría y Sanchez v Parliament [2000] ECR I-6031, para. 20; Italy v Commission, para. 50

5.      Under the second sentence of Article 91(1) of the Staff Regulations, the Union judicature has, in disputes of a financial character, unlimited jurisdiction, pursuant to which it has the power, if need be of its own motion, to order the defendant institution or agency to pay compensation for the damage caused by the defendant’s wrongful act and, in such a case, taking account of the circumstances of the case, to assess the damage suffered ex aequo et bono. That jurisdiction entrusts the Courts of the European Union with the task of providing a complete solution to the disputes brought before them and enables them, even in the absence of any formal claim for such relief, not only to annul the measure in point but also, where appropriate, to order of its own motion that compensation be paid by the defendant institution or agency for the non-material damage caused by maladministration on its part.

In the light of those principles, it cannot be argued that, in an action for annulment brought by an official against a decision of the Office for Harmonisation in the Internal Market (Trade Marks and Designs), the Civil Service Tribunal ruled ultra petita in awarding the official in question, who had not explicitly made such a claim, compensation for the non-material damage he had suffered as a result of the Office’s maladministration.

(see paras 83-85)

See: C-197/09 RX-II M v EMEA [2009] ECR I-12033, para. 56 and the case-law cited therein; C-583/08 P Gogos v Commission [2010] ECR I-4469, para. 44 and the case-law cited therein; T-404/06 P ETF v Landgren [2009] ECR II-2841, para. 232 and the case-law cited therein

6.      The unlimited jurisdiction enjoyed by the Courts of the European Union in financial disputes between the institutions and their staff cannot be regarded as conferring on those Courts the power to absolve such disputes from compliance with procedural rules governing the principle that the parties have the right to be heard. That principle, with which the Union’s Courts ensure compliance and themselves comply, forms part of the rights of the defence and applies to any proceedings capable of culminating in a decision of an institution or agency having a tangible effect on a person’s interests.

As a general rule, it means that the parties in a case must be given an opportunity to state their views on the facts and documents on which a judicial decision will be based, and to discuss the evidence and observations submitted to the court and the pleas in law which the court has raised of its own motion and on which it intends to base its decision. In order to satisfy the requirements relating to the right to a fair trial, it is important for the parties to be able to exchange arguments on both the facts and the points of law which are decisive for the outcome of the proceedings. Consequently, the Courts of the Union cannot, as a rule, base their decisions on a plea in law which they have raised of their own motion, even one involving a matter of public policy, without first having invited the parties to submit their observations on that plea.

In that respect, where the Civil Service Tribunal assesses whether an official of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) has suffered non-material damage, the scale of that damage and whether it is recoverable, without first having given the Office the opportunity to state its views properly on that question, it infringes the principle that the parties have the right to be heard and breaches the Office’s rights of the defence.

(see paras 86, 87, 91-92)

See: C-89/08 P Commission v Ireland and Others [2009] ECR I-11245, paras 50-57; M v EMEA, paras 40-42, and, respectively, the case-law cited therein, and para. 58; judgment of 12 May 2010 in T-491/08 P Bui Van v Commission, para. 88

7.      The appointing authority has a wide discretion as to the choice of the officials to be promoted. It follows that, even where it has been determined that the appointing authority committed illegalities during the promotion procedure to the detriment of the official concerned, those illegalities alone are not sufficient, if the authority’s wide discretion as regards promotions is not to be denied, to find that, without them, the official concerned would actually have been promoted and that the alleged material damage is therefore certain and real. The Staff Regulations do not confer any right to promotion, even on officials who are eligible for promotion. It follows that the chances of advancement of the official concerned cannot be determined sufficiently precisely by the Union judicature, without its substituting its own assessment for that of the appointing authority, to enable it to find that the official concerned has suffered pecuniary damage in that respect. Consequently, in the absence of an individual right to promotion, an applicant cannot rely on material damage consisting of the loss of additional income which he would have earned had he been promoted.

However, as recognised in the case-law, material damage which is real and certain and therefore recoverable may also result from the loss of an opportunity, such as that of being promoted. Where there is a series of sufficiently precise and plausible elements, supported by detailed calculations, to show that, regardless of the appointing authority’s broad discretion, the applicant official would have had a genuine and serious chance of being promoted if the balance of his merit points under a previous assessment and promotion system had been converted into merit points under a new system, the Civil Service Tribunal cannot lawfully find that even the serious chance of being promoted is not capable of providing a basis for material damage consisting of loss of income. On the contrary, such a potential loss is a relevant element in assessing the scale of the compensation to be awarded to make good damage resulting from the loss of an opportunity.

(see paras 102-106)

See: C-348/06 P Commission v Girardot [2008] ECR I-833, para. 54 et seq., and para. 67; T-132/03 Casini v Commission [2005] ECR-SC I-A-253 and II-1169, para. 97 and the case-law cited therein; T-166/04 C v Commission [2007] ECR-SC I-A-2-9 and II-A-2-49, paras 65 and 66