Court of Justice of the European Communities (including Court of First Instance Decisions)

Officials - Remuneration - Weightings - Five-yearly adjustment - Criteria - Living conditions in the various places of employment - Calculation of the "accommodation" item - Obligation to take account only of rents paid by European officials in the capitals of the Member States and other principal places of employment - Date on which the adjustment takes effect - Date to which the verification relates
( Staff Regulations, Art . 64 )

In Case 7/87
Commission of the European Communities, represented by its Legal Advisers, H . Etienne and D . Gouloussis, acting as Agents, with an address for service in Luxembourg at the office of G . Kremlis, a member of its Legal Department, Jean Monnet Building,
applicant,
Council of the European Communities, represented by its legal Adviser, J . Carbery, acting as Agent, with an address for service in Luxembourg at the office of J . Kaeser, Director of the Legal Department of the European Investment Bank,
defendant,
APPLICATION for the annulment of Council Regulation ( EEC, Euratom, ECSC ) No 3619/86 of 26 November 1986 correcting the weightings applicable in Denmark, Germany, Greece, France, Ireland, Italy, the Netherlands and the United Kingdom to the remuneration and pensions of officials and other servants of the European Communities ( Official Journal 1986, L 366, p . 1 ),
THE COURT
composed of : Lord Mackenzie Stuart, President, G . Bosco and O . Due ( Presidents of Chambers ), U . Everling, K . Bahlmann, Y . Galmot and R . Joliet, Judges,
Advocate General : J . L . da Cruz Vilaça
Registrar : H . A . Ruehl, Principal Administrator
having regard to the Report for the Hearing and further to the hearing on 28 January 1988,
after hearing the Opinion of the Advocate General delivered at the sitting on 28 April 1988,
gives the following
Judgment

1 By application lodged at the Court Registry on 15 January 1987, the Commission of the European Communities brought an action under the first paragraph of Article 173 of the EEC Treaty for the annulment of Council Regulation No 3619/86 of 26 November 1986 correcting the weightings applicable in Denmark, Germany, Greece, France, Ireland, Italy, the Netherlands and the United Kingdom to the remuneration and pensions of officials and other servants of the European Communities ( Official Journal 1986, L 336, p . 1 ).
2 The first paragraph of Article 63 of the Staff Regulations of Officials of the European Communities provides : "Officials' remuneration shall be expressed in Belgian francs . It shall be paid in the currency of the country in which the official performs his duties ".
3 To ensure that all officials, whatever their place of employment, obtain equivalent purchasing power from the remuneration which they receive, the first paragraph of Article 64 of the Staff Regulations provides that : "An official' s remuneration expressed in Belgian francs shall ... be weighted at a rate above, below or equal to 100% depending on living conditions in the various places of employment ". The second paragraph of Article 64 states that the weightings are to be adopted by the Council, acting on a proposal from the Commission .
4 By a decision of 26 June 1976 on the method of adjusting the remuneration of officials and other servants of the European Communities, which was not published, the Council instructed the Statistical Office of the European Communities periodically to verify "whether the ratios between weightings accurately reflect purchasing-power equivalences between places of employment" ( second paragraph of point II, 1 of that decision ).
5 By a decision of 15 December 1981 amending the method of adjusting the remuneration of officials and other servants of the Communities ( Official Journal 1981, L 386, p . 6 ), the Council adopted a new method of adjusting remuneration (" the 1981 method ") replacing that adopted on 26 June 1976 . The second subparagraph of point II, 1.1 provides that the verification is to take place every five years, that it is to be carried out in agreement with the statistical departments of the Member States and that it is to relate to the purchasing power of staff serving in the capitals of the Member States . The new method applies for the period from 1 July 1981 to 30 June 1991 .
6 With a view to verifying whether the weightings accurately reflected changes in the cost of living which occurred between 1 January 1976 and 31 December 1980, the Statistical Office of the European Communities carried out surveys in 1980 and 1981 . For all the items except the "accommodation" item the surveys related to the prices charged as at 1 January 1981 in capital cities for goods and services reflecting the consumer habits of European officials . As regards the "accommodation" item, since no figures were available for the rents paid by European officials in the capital cities, this item was calculated on the basis of the rents paid as at 1 January 1981 by the population in general in each Member State as a whole .
7 On the basis of the results of those surveys, the Commission drew up a proposal for a regulation amending the weightings, which it submitted to the Council on 17 July 1984 . In the explanatory memorandum to the proposal, the Commission explained that it had doubts concerning the reliability of the figures obtained because of the procedure used for calculating the "accommodation" item . With a view to reducing the risks of error resulting from that procedure, it suggested that there should be no upward or downward adjustment of weightings except for those where the change exceeded 2.5 %. According to the proposal, the new weightings would take effect as from 1 January 1981 .
8 When discussing the proposal, the Council objected that under Article 64 of the Staff Regulations every change in living conditions, even minimal changes, had to be taken into account . It therefore considered it illegal to adjust only those weightings for which the change exceeded 2.5 %.
9 Accepting the Council' s objection, the Commission instructed the Statistical Office of the European Communities to carry out a survey of the rents which had been paid as at 1 January 1981 by European officials employed in the capital cities . For that purpose, the Statistical Office questioned estate agencies at the end of 1984 and the beginning of 1985 on the rents being charged in the capital cities at that time for various types of accommodation corresponding to those usually occupied by European officials . The Office then calculated by extrapolation the rents which were charged for the same type of accommodation as at 1 January 1981 by reference to the changes which had occurred since that time in the price-index for rents .
10 On 23 December 1985 the Commission submitted to the Council a new proposal which superseded the previous one and which took account of the results of the rent survey . The second proposal maintained 1 January 1981 as the date on which the new weightings should come into force .
11 On 26 November 1986, the Council adopted the regulation at issue, which departs from the Commission proposal in two respects .
12 In the first place, the contested regulation rejects the results of the rent survey on the ground that "it failed, in particular, to deal with a truly representative sample of accommodation; ... furthermore, the survey should have been conducted pursuant to the second paragraph of point II, 1.1 of the Annex to Decision 81/1061/Euratom, ECSC, EEC, in agreement with the national statistical departments ". The regulation states that in those circumstance "it would be appropriate, at the present stage, to apply the old method using national rent averages resulting from the national accounting data pending a Commission study on the possibility of improving the method to be used ".
13 In the second place, the contested regulation specifies as the date on which the new weightings are to take effect not 1 January 1981 but 1 July 1986 . It states in that connection that "owing to the dates on which the original and the amended proposals were submitted and the difficulties which have arisen in regard to the exact calculation of the rent item, it is no longer possible to determine with sufficient accuracy the situation which obtained at 1 January 1981; ... it would therefore be advisable to select the first suitable date after the submission of the proposal, in this case 1 July 1986 ".
14 Reference is made to the Report for the Hearing for a fuller account of the applicable provisions and the facts of the case, and of the submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court .
The first submission
15 In its first submission the Commission claims that by calculating the weightings, in the case of the "accommodation" item, according to the cost thereof for the general population in each Member State as a whole rather then on the basis of the costs borne by European officials in the capital cities, the contested regulation infringes both the Staff Regulations and the 1981 method .
16 It is necessary first to consider whether the cost of the "accommodation" item must be measured with reference only to the capital cities of the Member States or whether it may be assessed with reference to each Member State as a whole .
17 It should be borne in mind in this regard that pursuant to the second paragraph of Article 64 of the Staff Regulations the weighting is to be fixed according to living conditions "in the various places of employment ". In a series of judgments delivered on 15 December 1982 ( Case 158/79 Roumengous v Commission (( 1982 )) ECR 4379; Case 543/79 Birke v Commission (( 1982 )) ECR 4425; Joined Cases 532, 534, 567, 600, 618 and 660/79 Amesz and Others v Commission (( 1982 )) ECR 4465; and Case 737/79 Battaglia v Commission (( 1982 ) ECR 4497 ), the Court interpreted the expression "places of employment" contained in the abovementioned provision as meaning the capital cities of the Member States and also the exact places where the duties of a sufficiently large number of officials and other employees of the Communities are performed .
18 It follows therefore from the first paragraph of Article 64 that the cost of the "accommodation" item must be calculated exclusively by reference to the capital cities of the Member States and the exact places where the duties of a sufficiently large number of officials and other employees of the Communities are performed .
19 It is then necessary to consider whether the "accommodation" item must be measured by reference only to the costs of accommodation borne by European officials in the capital cities and other places of employment or whether it may be assessed with reference to such costs borne by the general population in the said capital cities and other places of employment .
20 The types of accommodation usually occupied by European officials in capital cities and other places of employment may be different from those occupied by the general population in the said capital cities and other places of employment and therefore the costs of the "accommodation" item must be measured by reference to the costs borne in that respect by European officials in capital cities and other places of employment .
21 It follows that by fixing the weightings, as far as the "accommodation" item is concerned, by reference to the costs thereof for the general population in each Member State as a whole, the Council, by adopting its regulation, contravened the general rules which it itself laid down in Article 64 of the Staff Regulations .
22 Accordingly, the first submission must be upheld, without its being necessary to consider the arguments concerning the 1981 method .
The second submission
23 In its second submission, the Commission maintains that by fixing 1 July 1986 as the date on which the new weightings are to take effect although the verification concerned related to the cost of living at 1 January 1981, the contested regulation is also in breach of Article 64 of the Staff Regulations and of the 1981 method .
24 Article 24 of the Staff Regulations gives no clarification regarding the problem raised in the second submission .
25 However, the principle of equality of treatment underlying that provision requires the effect of the new weightings to be made retroactive to the date to which the verification relates . If the adjustment were not retroactive, inequalities in the purchasing power of officials found to exist with respect to periods which may extend over several years would never be eliminated, which would be incompatible with the principle of equality of treatment .
26 It follows that by fixing 1 July 1986 as the date on which the new weightings derived from the verification of the cost of living as at 1 January 1981 are to take effect, the contested regulation contravenes the principle of equality of treatment underlying Article 64 of the Staff Regulations .
27 The second submission must therefore also be upheld, without its being necessary to consider the arguments concerning the 1981 method .
28 In view of all the foregoing considerations, the contested regulation must be declared void .
29 However, in order to avoid a break in the continuity of the remuneration system, it is necessary for the annulled regulation to continue to have effect until the Council has adopted the measures which it is required to take in order to comply with this judgment .

Costs
30 Under Article 69 ( 2 ) of the Rules of Procedure the unsuccessful party is to be ordered to pay the costs if they have been asked for in the successful party' s pleadings . In the present case, neither party has asked for costs . It is therefore appropriate to order the parties to bear their own costs .

On those grounds,
THE COURT
hereby :
( 1 ) Declares Council Regulation No 3619/86 of 26 November 1986 ( Official Journal 1986, L 336, p . 1 ) void;
( 2 ) Declares that the aforesaid regulation shall continue to have effect until the Council has adopted the measures which it is required to take in order to comply with this judgment;
( 3 ) Orders the parties to bear their own costs .