61981J0059

1 . OFFICIALS - REMUNERATION - ANNUAL ADJUSTMENT - DISCRETIONARY POWER OF THE COUNCIL - LIMITS - OBLIGATION TO TAKE INTO ACCOUNT THE CRITERION OF CHANGES IN THE SALARIES OF NATIONAL CIVIL SERVANTS

( STAFF REGULATIONS OF OFFICIALS , ART . 65 ( 1 ))

2 . OFFICIALS - REMUNERATION - ANNUAL ADJUSTMENT - FACTORS TO BE TAKEN INTO CONSIDERATION - REFERENCE PERIOD

( STAFF REGULATIONS OF OFFICIALS ART . 65 ( 1 ))

3 . OFFICIALS - REMUNERATION - ADJUSTMENT WHEN THERE IS A SUBSTANTIAL RISE IN THE COST OF LIVING - DUTY OF THE COUNCIL - SCOPE

( STAFF REGULATIONS OF OFFICIALS , ART . 65 ( 2 ))

1 . THE SECOND SENTENCE OF THE SECOND PARAGRAPH OF ARTICLE 65 ( 1 ) OF THE STAFF REGULATIONS INDICATES THAT WHEN THE COUNCIL EXERCISES ITS DISCRETIONARY POWER IT MUST , WHEN MAKING THE ANNUAL REVIEW OF THE LEVEL OF REMUNERATION , INCLUDE ANY INCREASE IN SALARIES IN THE PUBLIC SERVICE AS ONE OF ALL THE FACTORS TO BE TAKEN INTO CONSIDERATION . ALTHOUGH THE WORD ' ' PARTICULAR ' ' IMPLIES THAT ARTICLE 65 DOES NOT REQUIRE THE COUNCIL TO TAKE ACCOUNT EXCLUSIVELY OF CHANGES IN THE SALARIES OF NATIONAL CIVIL SERVANTS WHEN ADJUSTING SALARIES FOR COMMUNITY CIVIL SERVANTS , THE REQUIREMENT IMPOSED BY THAT PROVISION MEANS THAT THE COUNCIL CANNOT , BY REASON OF THE FACT THAT IT TAKES OTHER CRITERIA INTO CONSIDERATION , OMIT TO TAKE ACCOUNT OF ONE OF THE TWO CRITERIA EXPRESSLY REFERRED TO IN THAT SENTENCE .

2 . SINCE THE ADJUSTMENT OF COMMUNITY SALARIES TAKES PLACE A POSTERIORI , THE VARIOUS FACTORS WHICH THE COUNCIL MUST TAKE INTO CONSIDERATION ARE THOSE RELATING TO THE REFERENCE PERIOD .

3 . THE DRAFTING OF ARTICLE 65 ( 2 ) OF THE STAFF REGULATIONS INDICATES THAT THE COUNCIL ' S DISCRETION IS LESS WIDE IN RELATION TO THE ADJUSTMENT OF OFFICIALS ' REMUNERATION TO TAKE ACCOUNT OF A CONSIDERABLE INCREASE IN THE COST OF LIVING THAN IN RELATION TO THE ANNUAL ADJUSTMENT OF SALARIES . THE WORDING OF THE PROVISION IMPLIES THAT WHEN THE COST OF LIVING RISES SUBSTANTIALLY THE COUNCIL HAS A DUTY TO TAKE STEPS TO ADJUST THE WEIGHTINGS , PARTICULARLY IN VIEW OF THE FACT THAT THAT PROVISION IS DESIGNED TO GUARANTEE , IN ACCORDANCE WITH THE PRINCIPLE OF EQUAL TREATMENT , THE MAINTENANCE OF EQUAL PURCHASING POWER FOR ALL OFFICIALS REGARDLESS OF THEIR PLACE OF EMPLOYMENT . IT FOLLOWS THAT THE POWER AVAILABLE TO THE COUNCIL IS NOT TO DETERMINE WHETHER WEIGHTINGS SHOULD BE ADJUSTED AT INTERVALS OF SIX MONTHS OR QUARTERLY , BUT TO DECIDE WHETHER OR NOT THERE HAS BEEN A SUBSTANTIAL INCREASE IN THE COST OF LIVING AND , IF THERE HAS , TO DRAW THE APPROPRIATE CONCLUSIONS .

IN CASE 59/81

COMMISSION OF THE EUROPEAN COMMUNITIES , REPRESENTED BY ITS LEGAL ADVISERS , JEAN-PIERRE DELAHOUSSE AND JOSEPH GRIESMAR , ACTING AS JOINT AGENTS , ASSISTED BY DANIEL JACOB OF THE BRUSSELS BAR , WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF ORESTE MONTALTO , A MEMBER OF THE COMMISSION ' S LEGAL DEPARTMENT , JEAN MONNET BUILDING , KIRCHBERG ,

APPLICANT ,

V

COUNCIL OF THE EUROPEAN COMMUNITIES , REPRESENTED BY DAVID GORDON-SMITH , DIRECTOR GENERAL IN THE LEGAL DEPARTMENT OF THE GENERAL SECRETARIAT OF THE COUNCIL , WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF DOUGLAS FONTEIN , DIRECTOR OF THE LEGAL AFFAIRS DIRECTORATE OF THE EUROPEAN INVESTMENT BANK , 100 BOULEVARD KONRAD-ADENAUER ,

DEFENDANT ,

APPLICATION FOR A DECLARATION THAT THE FOLLOWING MEASURES ARE VOID :

1 . COUNCIL REGULATION ( EURATOM/ECSC/EEC ) NO 187/81 OF 20 JANUARY 1981 ADJUSTING THE SALARIES AND PENSIONS OF OFFICIALS AND OTHER SERVANTS OF THE EUROPEAN COMMUNITIES AND THE WEIGHTINGS APPLYING THERETO ( PUBLISHED IN OFFICIAL JOURNAL L 21 , P . 18 , AND REPLACED BY THE VERSION PUBLISHED IN OFFICIAL JOURNAL L 130 , P . 26 );

2.ARTICLES 1 ( A ), 2 ( A ), 2 ( B ) AND THE FIRST PARAGRAPH OF ARTICLE 11 OF COUNCIL REGULATION ( EURATOM/ECSC/EEC ) NO 397/81 OF 10 FEBRUARY 1981 FIXING THE TABLES OF SALARIES AND OTHER COMPONENTS OF REMUNERATION CONSEQUENT UPON REGULATION NO 187/81 , IN SO FAR AS THEY RESULT FROM THAT REGULATION ( PUBLISHED IN OFFICIAL JOURNAL L 46 , P . 1 , AND REPLACED BY THE VERSION PUBLISHED IN OFFICIAL JOURNAL L 130 , P . 28 ),

1 BY APPLICATION LODGED AT THE COURT REGISTRY ON 16 MARCH 1981 THE COMMISSION OF THE EUROPEAN COMMUNITIES BROUGHT AN ACTION UNDER THE FIRST PARAGRAPH OF ARTICLE 173 OF THE EEC TREATY FOR A DECLARATION THAT THE FOLLOWING ARE VOID : FIRST , COUNCIL REGULATION ( EURATOM/ECSC/EEC ), NO 187/81 OF 20 JANUARY 1981 ADJUSTING THE SALARIES AND PENSIONS OF OFFICIALS AND OTHER SERVANTS OF THE EUROPEAN COMMUNITIES AND THE WEIGHTINGS APPLYING THERETO ( PUBLISHED IN OFFICIAL JOURNAL L 21 , P . 18 , AND REPLACED BY THE TEXT PUBLISHED IN OFFICIAL JOURNAL L 130 , P . 26 ); AND , SECONDLY , ARTICLES 1 ( A ), 2 ( B ) AND THE FIRST PARAGRAPH OF ARTICLE 11 OF COUNCIL REGULATION ( EURATOM/ECSC/EEC ) NO 397/81 OF 10 FEBRUARY 1981 FIXING THE TABLES OF SALARIES AND OTHER COMPONENTS OF REMUNERATION CONSEQUENT ON REGULATION NO 187/81 ( PUBLISHED IN OFFICIAL JOURNAL L 46 , P . 1 , AND REPLACED BY THE TEXT PUBLISHED IN OFFICIAL JOURNAL L 130 , P . 28 ).

2 THE TABLE OF SALARIES DRAWN UP BY THE COUNCIL THEREIN INDICATES THAT THE INSTITUTION DECIDED ON AN INCREASE IN THE BASIC MONTHLY SALARY FOR ALL OFFICIALS AND OTHER SERVANTS AMOUNTING TO BFR 1 107 NET FROM 1 JULY 1980 ; IN MAKING THAT DECISION THE COUNCIL ADOPTED ONLY A SMALL PART OF THE PROPOSAL PUT FORWARD BY THE COMMISSION . THE LATTER HAD SUGGESTED INCORPORATING INTO THE SCALE OF BASIC SALARIES AN INCREASE FOR EACH SALARY STEP OF 3.3% , THAT IS TO SAY , 3.1% FOR THE INCREASE IN THE COST OF LIVING RECORDED IN THE KINGDOM OF BELGIUM AND THE GRAND DUCHY OF LUXEMBOURG AND 0.2% FOR THE AVERAGE INCREASE IN PURCHASING POWER WHICH HAD BEEN RECORDED IN THE REMUNERATION OF NATIONAL CIVIL SERVANTS FOR THE PERIOD FROM 1 JULY 1979 TO 30 JUNE 1980 . THE COUNCIL ADOPTED THE COMMISSION ' S PROPOSAL ONLY WITH REGARD TO THE LOWEST PAID OFFICIALS AND SERVANTS , THAT IS TO SAY , THOSE IN STEP 1 OF GRADE D 4 , AND GAVE OTHER MEMBERS OF THE STAFF ONLY THE SAME AMOUNT , THUS REDUCING THE GENERAL AVERAGE INCREASE IN NOMINAL SALARIES FOR ALL OFFICIALS AND OTHER SERVANTS TO 1.5% . FURTHERMORE , THE COUNCIL REJECTED THE COMMISSION ' S PROPOSAL FOR A QUARTERLY ADJUSTMENT OF THE WEIGHTINGS FOR VARIOUS COUNTRIES OF EMPLOYMENT WHERE RISES IN THE COST OF LIVING WERE PARTICULARLY LARGE .

3 THE COMMISSION MAINTAINS THAT BY ADOPTING THAT COURSE THE COUNCIL BROKE WITH A LONG-STANDING PRACTICE BASED ON OBSERVING THE TERMS OF THE METHOD FOR ADJUSTING REMUNERATION DRAWN UP BY THE COUNCIL ON 20 JUNE 1976 , AND THEREBY INFRINGED ARTICLE 65 ( 1 ) OF THE STAFF REGULATIONS , COMMITTED A BREACH OF THE PRINCIPLE OF THE PROTECTION OF LEGITIMATE EXPECTATION AND THE PRINCIPLE OF PROPORTIONALITY , AND FAILED TO SATISFY THE REQUIREMENT OF A PRECISE STATEMENT OF THE REASONS ON WHICH THE MEASURES WERE BASED ; IN ADDITION AS FAR AS REGULATION NO 397/81 WAS CONCERNED , IT INFRINGED ARTICLE 65 ( 2 ) OF THE STAFF REGULATIONS AND FAILED TO HAVE REGARD TO THE PRINCIPLE OF EQUAL TREATMENT OF OFFICIALS .

4 BEFORE THE VARIOUS ARGUMENTS RELIED UPON BY THE COMMISSION IN SUPPORT OF ITS APPLICATION ARE CONSIDERED , IT IS APPROPRIATE TO REVIEW THE BACKGROUND TO THE DISPUTE .

THE BACKGROUND TO THE DISPUTE

5 ARTICLE 65 ( 1 ) AND ( 2 ) OF THE STAFF REGULATIONS OF OFFICIALS READS AS FOLLOWS :

' ' ( 1 ) THE COUNCIL SHALL EACH YEAR REVIEW THE REMUNERATIONS OF THE OFFICIALS AND OTHER SERVANTS OF THE COMMUNITIES . THIS REVIEW SHALL TAKE PLACE IN SEPTEMBER IN THE LIGHT OF A JOINT REPORT BY THE COMMISSION 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 .

DURING THIS REVIEW THE COUNCIL SHALL CONSIDER WHETHER , AS PART OF ( THE ) ECONOMIC AND SOCIAL POLICY OF THE COMMUNITIES , REMUNERATION SHOULD BE ADJUSTED . PARTICULAR ACCOUNT SHALL BE TAKEN OF ANY INCREASES IN SALARIES IN THE PUBLIC SERVICE AND THE NEEDS OF RECRUITMENT .

( 2)IN THE EVENT OF A SUBSTANTIAL CHANGE IN THE COST OF LIVING , THE COUNCIL SHALL DECIDE , WITHIN TWO MONTHS , WHAT ADJUSTMENTS SHOULD BE MADE TO THE WEIGHTINGS AND IF APPROPRIATE TO APPLY THEM RETROSPECTIVELY . ' '

6 AFTER THE ANNUAL REVIEW OF REMUNERATION IN 1966 IT WAS AGREED THAT SUCH ADJUSTMENTS MUST SEEK NOT ONLY TO ADAPT SALARIES TO THE INCREASE IN THE COST OF LIVING , BUT ALSO TO GIVE OFFICIALS AND SERVANTS THE BENEFITS OF THE INCREASE IN THE LEVEL OF INCOMES RECORDED IN THE COMMUNITY ( SEE THE JUDGMENTS OF 5 JUNE 1973 AND 26 JUNE 1975 IN COMMISSION V COUNCIL , CASE 81/72 ( 1973 ) ECR 575 AND CASE 70/74 ( 1975 ) ECR 795 RESPECTIVELY ).

7 PURSUANT TO THE FIRST SUBPARAGRAPH OF ARTICLE 65 ( 1 ) OF THE STAFF REGULATIONS THE REVIEW MUST BE BASED ON A JOINT INDEX SHOWING THE VARIATIONS IN REMUNERATION IN THE MEMBER STATES AND THUS UNTIL 1972 A COMMUNITY SPECIFIC INDICATOR WAS USED FOR THIS PURPOSE , PREPARED ACCORDING TO A WEIGHTED AVERAGE ON THE BASIS OF NATIONAL SPECIFIC INDICES WHICH WERE REQUIRED TO REFLECT , FOR A REPRESENTATIVE GROUP OF OFFICIALS , THE ALTERATION IN AVERAGE NOMINAL PAY IN RELATION TO THE INCREASE IN THE COST OF LIVING .

8 SINCE APPLICATION OF THAT INDICATOR GAVE RISE TO DISAGREEMENT AT THE TIME OF THE ANNUAL REVIEW OF THE LEVEL OF REMUNERATION , THE COUNCIL ON 20 AND 21 MARCH 1972 , ACTING ON A PROPOSAL PUT FORWARD BY THE COMMISSION , ADOPTED A ' ' SYSTEM OF ADJUSTMENT OF REMUNERATION ' ' IN WHICH IT UNDERTOOK , FOR A TRIAL PERIOD OF 3 YEARS FROM 1 JULY 1972 TO 30 JUNE 1975 , TO FIX THE LEVEL OF THE REAL INCREASE IN COMMUNITY REMUNERATION WITHIN A BRACKET FORMED ON THE ONE HAND BY THE SPECIFIC INDICATOR ALREADY USED PREVIOUSLY , BUT IMPROVED , AND ON THE OTHER HAND , BY AN INDICATOR CALLED ' ' TOTAL EMOLUMENTS PER HEAD IN PUBLIC ADMINISTRATION ' ' , AS PUBLISHED IN NATIONAL ACCOUNTS , WHICH WAS INTENDED TO REFLECT THE VARIATION IN THE TOTAL REMUNERATION AND OTHER BENEFITS GIVEN TO NATIONAL CIVIL SERVANTS IN EACH MEMBER STATE , THAT IS TO SAY , GIVING A SPECIFIC FORM TO THE INCREASE IN THE LEVEL OF INCOMES RECORDED IN THE COMMUNITY . THE COURT STATED IN ITS JUDGMENT OF 5 JUNE 1973 THAT ' ' BY ITS DECISION OF 21 MARCH 1972 , THE COUNCIL , ACTING WITHIN THE FRAMEWORK OF THE POWERS RELATING TO THE REMUNERATION OF 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 ' ' .

9 AT THE END OF THE THREE YEARS FOR WHICH THE FIRST METHOD , THAT OF 1972 , APPLIED , THE COUNCIL ADOPTED ON 29 JUNE 1976 A NEW METHOD FOR ADJUSTING REMUNERATION , KNOWN AS THE 1976 METHOD . WHEN IT DID SO , THE COUNCIL , AFTER STATING THAT IT DID NOT THEREBY INTEND TO RESTRICT ITS POWER OF APPRAISAL TO A FURTHER EXTENT THAN REQUIRED BY THE APPLICATIONS OF ARTICLE 65 OF THE STAFF REGULATIONS , DEFINED A METHOD OF CALCULATION TO WHICH NO TIME-LIMIT WAS ATTACHED , BUT WHICH WAS OPEN TO REVIEW ON A PROPOSAL BY THE COMMISSION ' ' IN ORDER TO DETERMINE WHAT IMPROVEMENTS MIGHT BE MADE SUBSEQUENTLY AND TO ADJUST ANY INEQUALITIES ' ' . THAT METHOD WAS IN FORCE ON THE DATE WHEN THE REGULATIONS AT ISSUE IN THIS APPLICATIONS WERE ADOPTED .

10 THE 1976 METHOD COMPRISES , FIRST , A BASIC PRINCIPLE , AS IN 1972 , ACCORDING TO WHICH ' ' THE SYSTEM OF ADJUSTING REMUNERATION FORMS PART OF A POLICY AIMED TO GUARANTEE , IN THE MEDIUM TERM , THAT THE REMUNERATION PAID TO EUROPEAN OFFICIALS MOVES PARALLEL TO AVERAGE SALARIES PAID IN MEMBER STATES TO THE VARIOUS GRADES OF NATIONAL CIVIL SERVANTS ' ' .

11 IN ORDER TO ACHIEVE THAT AIM , AND IN APPLICATION OF ARTICLE 65 ( 1 ) OF THE STAFF REGULATIONS , THE COUNCIL IS TO DECIDE , ON A PROPOSAL OF THE COMMISSION , WHETHER IN THE CONTEXT OF THE ECONOMIC AND SOCIAL POLICY OF THE COMMUNITIES IT IS APPROPRIATE FOR REMUNERATION TO BE ADJUSTED , AND THAT DECISION IS TO BE TAKEN IN THE LIGHT OF FIVE FACTORS .

12 OF THOSE FIVE FACTORS , THREE ARE SUPPLIED BY THE STATISTICAL OFFICE OF THE EUROPEAN COMMUNITIES : THEY ARE TRENDS IN THE COST OF LIVING , TRENDS IN THE REAL INCOME OF NATIONAL CIVIL SERVANTS AND CIVIL SERVICE PER CAPITA EMOLUMENTS IN REAL TERMS ; THE OTHER TWO ARE SUPPLIED BY THE COMMISSION AND COMPRISE , FIRST , GENERAL ECONOMIC AND SOCIAL FACTORS - WHICH CONCERN ' ' OTHER MACRO- ECONOMIC INFORMATION INDICATIVE OF THE ECONOMIC AND SOCIAL POLICY OF THE MEMBER STATES OF THE COMMUNITY , SUCH AS THE GROSS DOMESTIC PRODUCT PER HEAD OF THE WORKING POPULATION AND TOTAL PER CAPITA EMOLUMENTS IN THE ECONOMY AS A WHOLE ' ' - AND , SECONDLY , RECRUITMENT NEEDS AND THE STRUCTURE OF COMMUNITY STAFF COMPLEMENTS .

13 THE METHOD PROVIDES FOR THE ANNUAL ADJUSTMENT OF REMUNERATION TO BE MADE A POSTERIORI AND TO TAKE EFFECT RETROACTIVELY ON 1 JULY OF THE YEAR IN WHICH THE END OF THE REFERENCE PERIOD USED FOR THE REVIEW OF THE LEVEL OF REMUNERATION FALLS , THAT PERIOD CORRESPONDING TO THE 12 MONTHS PRECEDING 1 JULY OF THE YEAR IN WHICH THE REVIEW IS CARRIED OUT .

14 IN ACCORDANCE WITH THAT METHOD THE COUNCIL ADOPTED FOUR REGULATIONS PROVIDING FOR AN ANNUAL ADJUSTMENT OF REMUNERATION FOLLOWING PROPOSALS MADE BY THE COMMISSION ON THE BASIS OF INFORMATION SUPPLIED BY THE STATISTICAL OFFICE . IT ALSO ADOPTED , AGAIN ON PROPOSALS PUT FORWARD BY THE COMMISSION , FIVE REGULATIONS MAKING INTERIM ADJUSTMENTS TO THE WEIGHTINGS CONSEQUENT UPON A SUBSTANTIAL RISE IN THE COST OF LIVING .

15 HOWEVER , BY THE TIME REGULATION NO 161/80 OF 21 JANUARY 1980 ( OFFICIAL JOURNAL L 20 , P . 5 ) WAS ADOPTED , RESERVATIONS HAD ALREADY BEEN EXPRESSED WITH REGARD TO THE 1976 METHOD AND THE COMMISSION WAS ASKED TO SUBMIT TO THE COUNCIL BY ' ' 1 JULY 1980 A STUDY OF THE RESULTS OF APPLYING THE METHOD ' ' TOGETHER WITH AN APPROPRIATE PROPOSAL FOR REVISING IT . AT THE END OF 1980 THE COMMISSION SUBMITTED TO THE COUNCIL THE STUDY WHICH IT HAD REQUESTED TOGETHER WITH PROPOSALS FOR ADJUSTING THE METHOD . HOWEVER , THE 1976 METHOD HAD NOT BEEN REVISED WHEN THE COUNCIL , ON 20 JANUARY AND 10 FEBRUARY 1981 , ADOPTED THE REGULATIONS AT ISSUE , ADOPTING THE COMMISSION ' S PROPOSALS ONLY WITH REGARD TO THE LOWEST-PAID OFFICIALS .

16 THE COMMISSION CHALLENGES THOSE REGULATIONS AND SEEKS TO HAVE THEM DECLARED VOID UNDER ARTICLE 173 OF THE EEC TREATY ON SEVEN GROUNDS ; THE FIRST SIX SUBMISSIONS ASK FOR A DECLARATION FROM THE COURT THAT THE COUNCIL WAS AT FAULT IN FIXING A FLAT-RATE INCREASE OF BFR 1 107 FOR ALL EUROPEAN OFFICIALS ; THE SEVENTH SEEKS A DECLARATION FROM THE COURT THAT THE COUNCIL WAS AT FAULT IN REFUSING TO ADOPT THE COMMISSION ' S PROPOSAL FOR A QUARTERLY ADJUSTMENT OF THE WEIGHTINGS FOR OFFICIALS RESIDING IN COUNTRIES WITH A HIGH INFLATION .

ADJUSTMENT OF SALARIES

17 IN THE FIRST SUBMISSION THE COMMISSION CLAIMS THAT THE COUNCIL INFRINGED ARTICLE 65 ( 1 ) INASMUCH AS IT TOOK INTO ACCOUNT THE DETERIORATION IN THE GENERAL ECONOMIC SITUATION IN THE COMMUNITY , WHEREAS THAT PROVISION REQUIRED IT TO MAKE ITS DECISION ADJUSTING REMUNERATION AND PENSIONS IN ACCORDANCE WITH THE ' ' ECONOMIC AND SOCIAL POLICY OF THE COMMUNITIES ' ' . IN THE SECOND SUBMISSION IT MAINTAINS THAT BY REDUCING EUROPEAN OFFICIALS ' PURCHASING POWER WHEREAS THAT OF NATIONAL CIVIL SERVANTS INCREASED DURING THE SAME REFERENCE PERIOD THE COUNCIL AGAIN INFRINGED THE TERMS OF ARTICLE 65 ( 1 ) WHICH REQUIRE IT TO TAKE ACCOUNT , IN PARTICULAR , OF ' ' ANY INCREASES IN SALARIES IN THE PUBLIC SERVICE ' ' .

18 SINCE THE TWO SUBMISSIONS ARE LINKED , THEY MUST BE CONSIDERED TOGETHER .

19 THE COUNCIL HAS SUBMITTED THAT THESE TWO SUBMISSIONS BOTH CONCERN THE SCOPE OF ITS DISCRETIONARY POWER UNDER ARTICLE 65 ( 1 ). THERE IS NO DOUBT , IT MAINTAINS , THAT THE PROVISIONS ACCORDS IT A WIDE DISCRETION ; THUS THE COURT OF JUSTICE MUST CONFINE ITSELF , IN ITS REVIEW OF LEGALITY , TO CONSIDERING WHETHER THE REGULATION AT ISSUE IS VITIATED BY MAINIFEST ERROR OR BY MISUSE OF POWERS , OR WHETHER THE INSTITUTION IN ADOPTING IT MANIFESTLY EXCEEDED THE BOUNDS OF ITS DISCRETION . THE COUNCIL POINTS OUT ALSO THAT THERE IS NO IMPENETRABLE DIVIDING LINE BETWEEN THE CONCEPTS OF ' ' POLICY ' ' AND ' ' SITUATION ' ' AND THAT WHILST IT IS ADMITTEDLY BOUND TO TAKE FULLY INTO CONSIDERATION THE VARIATION IN SALARIES IN THE PUBLIC SERVICE IN THE MEMBER STATES , THAT IS NOT THE ONLY CRITERION TO BE APPLIED . IN THAT REGARD THE COMMISSION ' S ARGUMENT , IT IS CLAIMED , AMOUNTS TO INCORPORATING THE PRINCIPLE OF ANNUAL PARALLEL DEVELOPMENT IN THE STAFF REGULATIONS THEMSELVES , WHICH WOULD BE CONTRARY TO THE PROVISIONS IN ARTICLE 65 ; HENCE THAT REQUIREMENT OF THE STAFF REGULATIONS DOES NOT NECESSARILY HAVE A DECISIVE INFLUENCE ON THE DECISION TO BE ADOPTED .

20 WHILST ARTICLE 65 LEAVES THE COUNCIL FREE TO CHOOSE THE MOST SUITABLE MEANS AND FORMS FOR IMPLEMENTING THE POLICY WITH REGARD TO REMUNERATION , THE FIRST SENTENCE OF THE SECOND SUBPARAGRAPH OF ARTICLE 65 ( 1 ) REQUIRES THE COUNCIL TO PURSUE ITS POLICY IN ADJUSTING REMUNERATION ' ' AS PART OF THE ECONOMIC AND SOCIAL POLICY OF THE COMMUNITIES ' ' , AND THE SECOND SENTENCE OF THAT SUBPARAGRAPH REQUIRES THE COUNCIL TO TAKE ' ' PARTICULAR ' ' ACCOUNT OF ' ' ANY INCREASES IN SALARIES IN THE PUBLIC SERVICE ' ' .

21 THAT SECOND SENTENCE INDICATES THAT WHEN THE COUNCIL EXERCISES ITS DISCRETIONARY POWER IT MUST , WHEN MAKING THE ANNUAL REVIEW OF THE LEVEL OF REMUNERATION , INCLUDE ANY INCREASES IN SALARIES IN THE PUBLIC SERVICE AS ONE OF ALL THE FACTORS TO BE TAKEN INTO CONSIDERATION .

22 IT IS TRUE THAT THE WORD ' ' PARTICULAR ' ' IMPLIES THAT ARTICLE 65 DOES NOT REQUIRE THE COUNCIL TO TAKE ACCOUNT EXCLUSIVELY OF CHANGES IN THE SALARIES OF NATIONAL CIVIL SERVANTS WHEN ADJUSTING SALARIES FOR COMMUNITY CIVIL SERVANTS . NEVERTHELESS THE REQUIREMENT IMPOSED BY THAT PROVISION MEANS THAT THE COUNCIL CANNOT , BY REASON OF THE FACT THAT IT TAKES OTHER CRITERIA INTO CONSIDERATION , OMIT TO TAKE ACCOUNT OF ONE OF THE TWO CRITERIA EXPRESSLY REFERRED TO IN THE SECOND SENTENCE OF THE SECOND SUBPARAGRAPH OF ARTICLE 65 ( 1 ).

23 MOREOVER , IT SHOULD BE REMEMBERED THAT THE ADJUSTMENT OF COMMUNITY SALARIES TAKES PLACE A POSTERIORI , SO THAT THE VARIOUS FACTORS WHICH THE COUNCIL MUST TAKE INTO CONSIDERATION ARE THOSE RELATING TO THE REFERENCE PERIOD .

24 IT IS COMMON GROUND THAT DURING THE REFERENCE PERIOD JULY 1979 TO JUNE 1980 SALARIES IN THE NATIONAL PUBLIC SERVICE SHOWED AN AVERAGE INCREASE IN PURCHASING POWER OF THE ORDER OF 0.2% , AND EVEN 1.6% AFTER CORRECTION OF THE FIGURES FOR ITALY . IN ADDITION , ACCORDING TO THE ANNUAL REPORT ON THE ECONOMIC SITUATION OF NOVEMBER 1979 FOR THE YEAR 1979/1980 THE COUNCIL , WHICH IS EXPRESSLY REQUIRED IN THE SECOND SUBPARAGRAPH OF ARTICLE 65 ( 1 ) TO MAKE ITS DECISION AS PART OF THE ECONOMIC AND SOCIAL POLICY OF THE COMMUNITIES , MERELY RECOMMENDED TO THE MEMBER STATES THAT FOR THE PERIOD FROM JULY 1979 TO JUNE 1980 THE AVERAGE INCREASE IN REAL INCOME IN THE COMMUNITY MUST BE VIRTUALLY NIL , THAT IS TO SAY , IT MUST BE RESTRICTED TO MAINTAINING PURCHASING POWER , AND NO MORE .

25 BY CONTRAST , THE COUNCIL REGULATION AT ISSUE HAS THE EFFECT OF REDUCING THE PURCHASING POWER OF COMMUNITY SALARIES FOR THE SAME REFERENCE PERIOD BY AN AVERAGE OF 1.6% . THE COUNCIL HAS THUS DISREGARDED A CRITERION WHICH BY VIRTUE OF THE SECOND SUBPARAGRAPH OF ARTICLE 65 ( 1 ) OF THE STAFF REGULATIONS IT HAS A DUTY TO APPLY , NAMELY ANY INCREASES IN SALARIES IN THE PUBLIC SERVICE IN THE MEMBER STATES , WHEREAS ITS ASSESSMENT OF ' ' THE ECONOMIC AND SOCIAL POLICY OF THE COMMUNITIES ' ' FOR THE PERIOD IN QUESTION HAD LED IT TO RECOMMEND THAT PURCHASING POWER BE MAINTAINED .

26 IT FOLLOWS THAT IN DECIDING TO REDUCE THE PURCHASING POWER OF COMMUNITY SALARIES BY AN AVERAGE OF 1.6% WHEN FOR THE SAME REFERENCE PERIOD THAT OF SALARIES IN THE PUBLIC SERVICES IN THE MEMBER STATES ROSE BY 0.2% ( AND EVEN BY 1.6% AFTER CORRECTION OF THE FIGURES FOR ITALY ) THE COUNCIL FAILED TO COMPLY WITH ARTICLE 65 ( 1 ) OF THE STAFF REGULATIONS .

27 IN THE CIRCUMSTANCES IT DOES NOT APPEAR NECESSARY TO CONSIDER THE OTHER GROUNDS ADVANCED BY THE COMMISSION TO THE LIKE EFFECT .

ADJUSTMENT OF THE WEIGHTINGS

28 IN A SEVENTH SUBMISSION THE COMMISSION CLAIMS THAT BY REFUSING TO IMPLEMENT IN DECEMBER 1980 ITS PROPOSAL TO ADJUST THE WEIGHTINGS EVERY QUARTER , AND IN PARTICULAR TO ADJUST THEM FROM 1 APRIL 1980 FOR 11 COUNTRIES , SOME OF THEM MEMBER STATES AND SOME NON-MEMBER COUNTRIES , WITH A PARTICULARLY HIGH RATE OF INCREASE IN THE COST OF LIVING ( 10% OR MORE IN SIX MONTHS ) THE COUNCIL FAILED TO COMPLY WITH ARTICLE 65 ( 2 ) AS IT IS TO BE INTERPRETED IN THE LIGHT OF PREVIOUS PRACTICE AND , IN ADDITION , THE PRINCIPLE OF EQUAL TREATMENT WHICH REQUIRES THE COMPETENT AUTHORITY TO GUARANTEE EQUAL PURCHASING POWER FOR ALL OFFICIALS REGARDLESS OF THEIR PLACE OF EMPLOYMENT .

29 THE COUNCIL FIRST DENIES THE VERY EXISTENCE OF A PRACTICE AND MAINTAINS THAT ARTICLE 65 ( 2 ) DOES NOT REQUIRE IT TO COMPENSATE AT SUCH SHORT INTERVALS FOR INCREASES IN THE COST OF LIVING . AS TO THE ALLEGED FAILURE TO OBSERVE THE PRINCIPLE OF EQUAL TREATMENT THE COUNCIL , WHILST RECOGNIZING THE NEED TO MAINTAIN EQUAL PURCHASING POWER FOR ALL OFFICIALS REGARDLESS OF THEIR PLACE OF EMPLOYMENT , CONSIDERS ITSELF NONE THE LESS ENTITLED TO ADJUST SALARIES AS A WHOLE NO MORE THAN TWICE A YEAR , SINCE IT HAS NEVER ACCEPTED A SYSTEM OF AUTOMATIC INDEXING OF COMMUNITY SALARIES . SUCH AN APPROACH DOES NOT CONFLICT WITH ARTICLE 65 ( 2 ), EVEN THOUGH IT MAY LEAD TO TEMPORARY DISTORTIONS IN PURCHASING POWER .

30 IT MUST FIRST BE OBSERVED THAT , AS THE COURT DECLARED IN ITS JUDGMENT OF 19 NOVEMBER 1981 ( CASE 194/80 PAULO BENASSI V COMMISSION OF THE EUROPEAN COMMUNITIES ( 1981 ) ECR 2815 ), THE WEIGHTING MENTIONED IN ARTICLE 65 IS THE MEANS AVAILABLE TO THE COUNCIL FOR ADJUSTING THE REMUNERATION OF ALL OFFICIALS AND SERVANTS OF THE COMMUNITIES .

31 IN THESE CIRCUMSTANCES THE WEIGHTING CONSTITUTES , IN THE SCHEME OF ARTICLE 65 , IN ADDITION TO THE ANNUAL ADJUSTMENT PROVIDED FOR IN PARAGRAPH ( 1 ), A MEANS WHEREBY REMUNERATION MAY BE ADAPTED WHENEVER THERE IS A SUBSTANTIAL RISE IN THE COST OF LIVING .

32 THE DRAFTING OF PARAGRAPH ( 2 ) INDICATES THAT THE COUNCIL ' S DISCRETION IS LESS WIDE IN THAT MATTER THAN IN RELATION TO THE ANNUAL ADJUSTMENT OF SALARIES . THE PROVISION READS : ' ' IN THE EVENT OF A SUBSTANTIAL CHANGE IN THE COST OF LIVING , THE COUNCIL SHALL DECIDE . . . . WHAT ADJUSTMENTS SHOULD BE MADE TO THE WEIGHTINGS ' ' , WHICH IMPLIES THAT WHEN THE COST OF LIVING RISES SUBSTANTIALLY THE COUNCIL HAS A DUTY TO TAKE STEPS TO ADJUST THE WEIGHTINGS .

33 MOREOVER , THAT PROVISION , AS THE COUNCIL ITSELF HAS ACKNOWLEDGED , IS DESIGNED TO GUARANTEE , IN ACCORDANCE WITH THE PRINCIPLE OF EQUAL TREATMENT , THE MAINTENANCE OF EQUAL PURCHASING POWER FOR ALL OFFICIALS REGARDLESS OF THEIR PLACE OF EMPLOYMENT .

34 IT FOLLOWS THAT THE POWER AVAILABLE TO THE COUNCIL IS NOT TO DETERMINE WHETHER WEIGHTINGS SHOULD BE ADJUSTED AT INTERVALS OF SIX MONTHS OR QUARTERLY , BUT TO DECIDE WHETHER OR NOT THERE HAS BEEN A SUBSTANTIAL INCREASE IN THE COST OF LIVING AND , IF THERE HAS , TO DRAW THE APPROPRIATE CONCLUSIONS .

35 IN THIS CASE THE COMMISSION PROPOSED AN INTERIM , SUPPLEMENTARY ADJUSTMENT FOR COUNTRIES IN WHICH INFLATION WAS AT LEAST 10% IN SIX MONTHS , POINTING OUT IN ITS PROPOSAL THAT THAT WAS A SUBSTANTIAL INCREASE SINCE ANNUAL INFLATION RECORDED IN THE EUROPEAN COMMUNITY WAS IN THE REGION OF 10.3% PER ANNUM .

36 THE COUNCIL DID NOT DENY THAT SUCH AN INCREASE IN THE COST OF LIVING WAS SUBSTANTIAL AND THEREFORE WAS NOT ENTITLED TO REFUSE TO TAKE STEPS TO ADJUST THE WEIGHTINGS FOR THE COUNTRIES IN QUESTION IN ACCORDANCE WITH ARTICLE 65 ( 2 ), AND THE ABSENCE OF A PRACTICE REGARDING QUARTERLY ADJUSTMENTS COULD NOT JUSTIFY IT , WITHIN THE SCOPE OF ITS DISCRETIONARY POWER AS DEFINED ABOVE , IN REFUSING TO TAKE THE MEASURES NECESSARY FOR THE CORRECT APPLICATION OF THAT PROVISION .

37 IN THOSE CIRCUMSTANCES THE SEVENTH SUBMISSION PUT FORWARD BY THE COMMISSION MUST BE UPHELD AND REGULATION NO 187/81 MUST BE DECLARED VOID IN SO FAR AS IT IMPLIES A REFUSAL ON THE PART OF THE COUNCIL TO ADOPT , AS REQUIRED BY ARTICLE 65 ( 2 ) OF THE STAFF REGULATIONS , MEASURES TO ADJUST THE WEIGHTINGS APPLICABLE IN 11 COUNTRIES IN WHICH THE RATE OF INFLATION WAS PARTICULARLY HIGH .

38 IT FOLLOWS FROM ALL THE FOREGOING CONSIDERATIONS THAT REGULATION NO 187/81 , TOGETHER WITH ARTICLES 1 ( A ), 2 ( A ), 2 ( B ) AND THE FIRST PARAGRAPH OF ARTICLE 11 OF REGULATION NO 397/81 , IN SO FAR AS THEY ARE A CONSEQUENCE OF THE FIRST-MENTIONED REGULATION , MUST BE DECLARED VOID .

39 HOWEVER , IN ORDER TO AVOID ANY LACK OF CONTINUITY IN THE SYSTEM OF REMUNERATION IT IS APPROPRIATE THAT THE PROVISIONS IN THE REGULATIONS DECLARED VOID CONCERNING THE ADJUSTMENT OF THE REMUNERATION OF COMMUNITY OFFICIALS SHOULD CONTINUE TO HAVE EFFECT UNTIL SUCH TIME AS THE COUNCIL HAS ADOPTED THE MEASURES INCUMBENT UPON IT IN ORDER TO ENSURE COMPLIANCE WITH THIS JUDGMENT .

COSTS

40 ARTICLE 69 ( 2 ) OF THE RULES OF PROCEDURE PROVIDES THAT THE UNSUCCESSFUL PARTY IS TO BE ORDERED TO PAY THE COSTS IF THEY HAVE BEEN ASKED FOR IN THE SUCCESSFUL PARTY ' S PLEADING .

41 SINCE IN THIS CASE NEITHER OF THE PARTIES HAS ASKED FOR COSTS THEY MUST BE ORDERED TO BEAR THEIR OWN .

ON THOSE GROUNDS ,

THE COURT

HEREBY :

1 . DECLARES VOID COUNCIL REGULATION NO 187/81 OF 20 JANUARY 1981 ( OFFICIAL JOURNAL L 21 , P . 18 , REPLACED BY THE VERSION PUBLISHED IN THE OFFICIAL JOURNAL OF 16 MAY 1981 , L 130 , P . 26 ), TOGETHER WITH ARTICLES 1 ( A ), 2 ( A ), 2(B ) AND THE FIRST PARAGRAPH OF ARTICLE 11 OF COUNCIL REGULATION NO 397/81 OF 10 FEBRUARY 1981 ( OFFICIAL JOURNAL L 46 , P . 1 , REPLACED BY THE VERSION PUBLISHED IN THE OFFICIAL JOURNAL OF 16 MAY 1981 , L 130 , P . 29 ) IN SO FAR AS THEY RESULT FROM REGULATION NO 187/81 ;

2 . STATES THAT THE PROVISIONS OF THE SAID REGULATIONS CONCERNING THE ADJUSTMENT OF THE SALARIES OF COMMUNITY OFFICIALS SHALL CONTINUE TO HAVE EFFECT UNTIL SUCH TIME AS THE COUNCIL HAS ADOPTED THE MEASURES INCUMBENT UPON IT IN ORDER TO ENSURE COMPLIANCE WITH THIS JUDGMENT ;

3 . ORDERS THE PARTIES TO BEAR THEIR OWN COSTS .