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

(Staff cases Temporary staff Referral back to the Court of First Instance after setting aside Termination of contract Obligation to state the reasons on which the decision is based Misuse of powers Principle of sound administration)

In Case T-471/04,

Georgios Karatzoglou, a former member of the temporary staff of the European Agency for Reconstruction, residing in Préveza (Greece), represented by S. Pappas, lawyer,

applicant,

European Agency for Reconstruction (EAR), represented by S. Orlandi and J.'N. Louis, lawyers,

defendant,

APPLICATION for annulment of the decision of the EAR of 26 February 2004 to terminate the applicant's contract of employment,

composed of V. Tiili, President, F. Dehousse and I. Wiszniewska'Białecka (Rapporteur), Judges,

Registrar: C. Kantza, Administrator,

having regard to the written procedure and further to the hearing on 15 April 2008,

gives the following

Legal context

1. Article 10 of Council Regulation (EC) No 2667/2000 of 5 December 2000 on the European Agency for Reconstruction (OJ 2000 L 306, p. 7), in the version in force until 31 December 2004, applicable to the facts of this case states:

'The Agency's staff shall be subject to the rules and regulations applicable to officials and other servants of the European Communities ...'

'The Agency's staff shall consist of a strictly limited number of officials assigned or seconded by the Commission or Member States to carry out management duties. The remaining staff shall consist of other employees recruited by the Agency for a period strictly limited to its requirements.'

2. Article 47(2)(a) of the Conditions of employment of other servants of the European Communities, in the version in force until 30 April 2004 and applicable to the facts of the present case ('the CEOS'), states that, where the contract is for an indefinite period, the employment of temporary staff is to cease 'at the end of the period of notice stipulated in the contract'.

Facts

3. The applicant, Mr Georgios Karatzoglou, was recruited by the European Agency for Reconstruction (EAR) as a member of the temporary staff within the meaning of Article 2(a) of the CEOS, starting on 7 November 2001, for a fixed period of 18 months, in accordance with Article 4 of his contract of employment ('the contract').
4. Article 2 of the contract stipulates that the applicant is to be employed as an administrative assistant and that the place of employment is to be Podgorica (Montenegro).
5. Article 5(b) of the contract provides:

'This contract may be terminated by the institution or by the staff member for any of the reasons specified in Articles 47 to 50 of the [CEOS], subject to the conditions laid down in those articles.'

6. On 1 March 2002, by Addendum No 2 to the contract, the contracting parties amended Article 2 of the contract, as follows:

'The staff member shall be employed as Head of the Administrative Section. The place of employment shall be Skopje.'

7. On 13 September 2002, the EAR sent a warning to the applicant for non'compliance with the procedures of the EAR and the instructions given to him by his superior.
8. On 7 May 2003, at the end of the initial contractual period of 18 months, the parties agreed, in the form of an Addendum No 4 to the contract, to continue their contractual relationship, under a contract for an indefinite period.
9. Article 4 of the contract, as amended by Addendum No 4, provides:

'The contract shall run for an indefinite period. However, the duration shall not exceed the expiry date of the [EAR].

The [EAR] reserves the right to terminate the contract following a significant reduction or winding-up of its operations before the expiry date of the [EAR].'

10. According to that addendum, all other articles of the initial contract are to remain unaltered.
11. On 27 January 2004, the EAR offered the applicant a transfer to Thessaloniki (Greece), which he refused.
12. On 26 February 2004, the director of the EAR terminated the applicant's contract by a decision ('the contested decision') worded as follows:

'I regret to inform you that the decision has been taken to terminate your contract of employment with the [EAR]. The notice period will be of three months, starting on 27th February 2004, in accordance with Article 47(2) of the [CEOS] and the second paragraph of Article 5(b) of your contract.'

13. On 26 March 2004, the applicant was summoned by the Head of the Skopje Operational Centre, and, in the presence of a member of the EAR staff, was handed the decision to terminate his contract.
14. On 27 May 2004, the applicant lodged a complaint against the decision to terminate his contract, pursuant to Article 90(2) of the Staff Regulations of Officials of the European Communities ('the Staff Regulations'), applicable to him by virtue of Article 46 of the CEOS. That complaint was rejected by implication as the EAR failed to reply to it within the period of four months laid down in the Staff Regulations.

Procedure before the Court of First Instance and the Court of Justice

15. By application lodged at the Registry of the Court of First Instance on 6 December 2004, the applicant brought the present proceedings.
16. By judgment of 23 February 2006 in Case T-471/04 Karatzoglou v EAR [2006] ECR'SC II'A'2'157, 'the judgment at first instance'), the Court of First Instance (Fourth Chamber) annulled the contested decision.
17. By application lodged at the Registry of the Court of Justice on 8 May 2006, the EAR, pursuant to Article 56 of the Statute of the Court of Justice, brought an appeal against the judgment at first instance, cited in paragraph 16 above.
18. In support of its appeal, the EAR put forward two pleas in law.
19. In its first plea, the EAR claimed that the Court of First Instance had erred in law in interpreting the terms of the contract in a way that was manifestly contrary to the parties' intentions. By its second plea, the EAR claimed that the Court of First Instance erred in law by finding a breach of the principle of the protection of legitimate expectations.
20. In its judgment of 18 July 2007 in Case C-213/06 P EAR v Karatzoglou [2007] ECR I-6733 the Court of Justice upheld the second plea. In that regard, the Court held:

'36. The Court of First Instance stated, at paragraph 36 of the judgment under appeal, that 'the amendment of Article 4 of the initial contract by ... Addendum [No 4] brought about an ambiguous situation as regards the content of the contract'. At paragraph 37 of that judgment, it explained that 'had the second paragraph of Article 4 not been added, the EAR would indisputably have had the right to terminate [Mr Karatzoglou's] contract for one of the reasons specified in Articles 47 to 50 of the CEOS, subject to compliance with the conditions laid down in those articles, as provided by Article 5(b) of the initial contract. However, the addition of the second paragraph of Article 4 could have given the applicant the impression that the EAR had restricted its power to terminate the contract to circumstances in which there was a reduction or winding up of the operation of the EAR before the expiry date of its mission'.

37. It is clear from the foregoing that the Court of First Instance itself recognised that Mr Karatzoglou's contractual situation was at least uncertain.

38. Contrary to the Court of First Instance's findings at paragraphs 38 to 40 of the judgment under appeal, such ambiguity cannot give rise to 'precise assurances'. The new Article 4 of the contract was capable of being interpreted both in the sense relied on by Mr Karatzoglou and in that chosen by the EAR (see, to that effect, [Case C-82/98 P] Kögler v Court of Justice [[2000] ECR I-3855], paragraph 34).

39. Moreover, it must be pointed out that no other factor capable of giving rise to Mr Karatzoglou's belief as to the length of his contract is clear from the judgment under appeal. The Court of First Instance's finding that such assurances exist rests solely on the contractual situation arising from the amendment of Article 4 of Mr Karatzoglou's initial contract.

40. Nor, in that respect, is it possible to rely on the principle, referred to by the Court of First Instance at paragraph 39 of the judgment under appeal, to the effect that the weaker party to an employment contract can expect vague provisions of the contract to be interpreted in his favour.

41. Suffice it to observe that whether or not Mr Karatzoglou may be considered the weaker party to the contract has no effect on the finding that there were no specific assurances in the present case by the Community administration. Factors linked to Mr Karatzoglou's contractual situation in relation to his employer cannot make up for the absence of one of the pre'conditions for establishing the existence of a legitimate expectation.

42. It follows, in the present case, that the requirements for a finding of breach of the principle of the protection of legitimate expectations were not met.

43. Accordingly, the Court of First Instance erred in law when it held that the contested decision had adversely affected Mr Karatzoglou's legitimate expectation that his contract would be terminated only in the event of a significant reduction or winding-up of the EAR's operations before the expiry date of its mission.'

21. Consequently, the Court set aside the judgment at first instance, cited in paragraph 16 above, referred the case back to the Court of First Instance for that Court to rule on the other pleas relied on by the applicant at first instance and reserved the costs.
22. The case was assigned to the Fourth Chamber of the Court of First Instance. When the composition of the chambers of the Court of First Instance changed, the Judge'Rapporteur became a member of the First Chamber and, consequently, the case was reassigned to that chamber.
23. In accordance with Article 119(1) of the Rules of Procedure of the Court of First Instance, the applicant and the defendant each lodged their written observations.
24. Upon hearing the report of the Judge'Rapporteur, the Court of First Instance (First Chamber) decided to open the oral procedure.
25. The parties presented oral arguments and replied to the questions put to them by the Court at the hearing.

Forms of order sought by the parties in the proceedings following referral of the case

26. The applicant claims that the Court of First Instance should:

annul the contested decision;

order the EAR to pay the costs.

27. The EAR contends that that Court of First Instance should:

dismiss the action;

order the applicant to pay the costs.

Law

28. Having withdrawn, at the hearing, the plea in law alleging infringement of Article 47(2) of the CEOS concerning the period of notice, of which the Court of First Instance took legal notice, the applicant put forward three pleas in law alleging, first, breach of the duty to state reasons, second, misuse of powers and three, infringement of the principle of sound administration.

The plea alleging breach of the duty to state reasons

Arguments of the parties

29. The applicant claims that the contested decision does not contain any reasons to justify the termination of his contract. The EAR committed itself not to terminate the applicant's contract unless there was a significant reduction or winding'up of its operations before the expiry date of the EAR, in accordance with Article 4 of the contract, as amended by Addendum No 4. However, in the present case, those conditions are neither established nor even cited by the EAR. Moreover, the applicant considers that there was no need to reduce staff; on the contrary the number of staff increased.
30. It follows from the judgment in Case F'1/05 Landgren v ETF [2006] ECR'SC I'A'000 and II'000 that the dismissal of any member of the temporary staff engaged under a contract for an indefinite period requires a statement of reasons. The applicant claims that the reasons for his dismissal should have been made known to him, since his contract was terminated before the expiry date of the EAR and in view of the preceding attitude of the administration, which, in particular, decided his promotion and the renewal of his contract for an indefinite period.
31. The EAR contends that justification for the termination of the applicant's contract, expressly provided for in Article 47 of the CEOS, lies in the contract itself and there is no need, therefore, for a statement of reasons. In that regard, the Civil Service Tribunal, in its judgment in Landgren v ETF (paragraph 30, above), departed from existing case'law.
32. According to settled case'law, the institutions have a broad discretion to organise their departments to suit the tasks entrusted to them. The scope of the duty to state reasons must be assessed taking account of the particular context in which the EAR carries out its tasks, namely, the uncertainty as regards extension of its mandate and the fluctuations in its staffing requirements. The termination of the applicant's contract was justified by the second paragraph of Article 10 of Regulation No 2667/2000, which provides that employees other than officials are to be recruited by the EAR for a period strictly limited to its requirements. The EAR's staff was well aware that the EAR's staffing requirements would fluctuate over a very limited period.
33. In addition, the EAR took account of the applicant's personal circumstances and sought an amicable solution in offering to transfer him to Thessaloniki in order to avoid having to terminate his contract. When no amicable solution was reached, the EAR had to terminate the applicant's contract in the interest of the service, in the light in particular of its duty to restrict its staffing to its requirements. The Head of Administration and the lawyer of the EAR explained to the applicant, in the course of several meetings, the reasons which justified the termination of his contract and the applicant cannot claim not to know them.

Findings of the Court

34. At the outset, it should be pointed out that, in the context of the present plea in law, the applicant not only claims that there was a failure to state reasons in the contested decision but also disputes the fact that it was necessary to reduce the number of staff at the EAR. By the latter argument, the applicant challenges the validity of the contested decision. Since that question does not fall within the analysis of the duty to state reasons but within that of the substance of the contested decision, it will be dealt with in the context of the analysis of the plea alleging misuse of powers.
35. With regard to the alleged failure to state reasons, according to the case'law, the unilateral termination of a contract of employment for an indefinite period, expressly provided for in Article 47(2)(a) of the CEOS, arises from a broad discretion of the competent authority and is recognised by the member of staff at the time of his recruitment. Justification for it is to be found in the contract of employment and therefore reasons do not have to be stated for it (Case 25/68 Schertzer v Parliament [1977] ECR 1729, paragraph 39; Case T-45/90 Speybrouck v Parliament [1992] ECR II-33, paragraph 93; and Case T-51/91 Hoyer v Commission [1994] ECR'SC I'A'103 and II'341, paragraph 27).
36. A member of the temporary staff whose recruitment is based on a contract liable to be terminated unilaterally and without the need to give reasons, in accordance with the applicable law, differs fundamentally, in that respect, from that of an official. He does not benefit from the security of tenure guaranteed to the latter, since his activities are, by definition, intended to be carried out only for a limited period (Case C-18/91 P V v Parliament [1992] ECR I-3997, paragraph 39; Case T-256/01 Pyres v Commission [2005] ECR'SC I'A'23 and II'99, paragraph 43; Case T-10/02 Girardot v Commission [2006] ECR'SC I'A'000 and II'0000, paragraph 72). The situation of a member of the temporary staff is different from that of an official under the Staff Regulations, thus precluding the application by analogy of Article 25(2) of the Staff Regulations, as provided for under the general terms of Article 11 of the CEOS (Schertzer v Parliament, paragraph 40; Speybrouck v Parliament, paragraph 93; and Hoyer v Commission, paragraph 27; all three cases cited in paragraph 35 above).
37. In the present case, the applicant was recruited by the EAR as a member of the temporary staff, within the meaning of Article 2(a) of CEOS. In accordance with the second paragraph of Article 10 of Regulation No 2667/2000, members of the temporary staff were recruited by the EAR for a period strictly limited to the EAR's requirements.
38. Article 5(b) of the contract, concluded for an indefinite period, expressly provided that each of the parties could terminate it unilaterally provided that they respected the three'month notice period and referred to Articles 47 to 50 of the CEOS. That contract did not impose a duty to state reasons on the employer. Moreover, Article 49 of the CEOS, which imposes a duty to state reasons for the dismissal of a member of the temporary staff where the unilateral termination occurs for a disciplinary reason, does not apply to the present case.
39. At the date of adoption of the contested decision, the EAR may have considered, in accordance with case'law, that it was not necessary to state reasons for a decision to terminate the contract of a member of the temporary staff.
40. None the less, in its judgment in Landgren v ETF, cited in paragraph 30 above (paragraphs 73 and 74), the Civil Service Tribunal held that there was no overriding reason which would justify it in excluding members of the temporary staff from protection against dismissals for which reasons were not stated, particularly where they are bound by a contract for an indefinite period or where, being bound by a contract for a fixed period, they are dismissed before the termination thereof. The Tribunal found that, in order to ensure a sufficient degree of protection in that respect, it is necessary to enable, first, persons concerned to determine whether their legitimate interests have been respected or damaged and to assess whether it would be appropriate to initiate judicial proceedings and, second, the courts to exercise their powers of review, which amounts to an obligation on the part of the competent authorities to state reasons for their decisions.
41. Even if, pursuant to the judgment in Landgren v ETF, cited in paragraph 30 above, which is currently under appeal, the EAR should have stated reasons for the contested decision, it must be stated that, in the present case, sufficient reasons were stated for that decision.
42. It follows from the case'law that the scope of the duty to state reasons must be assessed in relation to specific circumstances, in particular the content of the measure, the nature of the reasons relied on and the interest that the addressee may have in receiving explanations (Case T-10/99 Vicente Nuñez v Commission [2000] ECR'SC I'A'47 and II'203, paragraph 41, Joined Cases T-338/00 and T-376/00 Morello v Commission [2002] ECR'SC I'A'301 and II'1457, paragraph 46). It is necessary, in order to assess the sufficiency of the reasons stated, to put them in the same context as that of the adoption of the contested measure (Case T-283/97 Thinus v Commission [1999] ECR'SC I'A'69 and II'353, paragraph 77, and Morello v Commission, paragraph 47).
43. The reasons given for a decision are sufficient if it was adopted in circumstances known to the member of staff concerned which enable him to understand the scope of the measure concerning him (see, to that effect, Case C-294/95 P Ojha v Commission [1996] ECR I-5863, paragraph 35, and Joined Cases T-118/04 and T-134/04 Caló v Commission [2007] ECR'SC I'A'000 and II'000, paragraph 128).
44. In the present case, in his complaint of 27 May 2004 to the appointing authority against the contested decision, the applicant admitted that he was informed on numerous occasions that his post would be abolished because of a reduction of the administrative staff of the EAR. Moreover, the applicant cannot claim that he was unaware of the reason for his dismissal, since, in his initial application, he challenges the contention that it was the need to reduce staff at the EAR which was the real reason for the termination of his contract.
45. It follows that the applicant was informed that, if he refused to transfer to Thessaloniki, his contract would be terminated because of the need for the EAR to reduce its administrative staff. Consequently, the reasons given for the contested decision must, in any event, be considered to be sufficient.
46. It follows from all of the foregoing that the plea in law alleging a breach of the duty to state reasons must be rejected.

The plea alleging misuse of powers

Arguments of the parties

47. The applicant claims that the EAR misused its powers in that the real reason for his dismissal was not a significant reduction or winding-up of the operations of the EAR but his replacement by another member of staff with less experience who was recruited in order to create overstaffing justifying a reduction in staff. When he declined to be transferred to Thessaloniki, the EAR terminated his contract.
48. The EAR contends that that plea in law is unfounded. The EAR has a broad discretion to organise its departments. The applicant has failed to demonstrate that, in terminating his contract, the EAR pursued any objective other than that of successfully carrying out the tasks entrusted to it, having recourse only to staff strictly limited to its requirements.

Findings of the Court

49. According to settled case'law, the concept of misuse of powers has a very precise meaning and encompasses the use by an administrative authority of its powers for a purpose other than that for which they were conferred upon it. A decision is vitiated by misuse of powers only if it appears, on the basis of objective, relevant and consistent factors, to have been taken with the purpose of achieving ends other than those stated (Case T-111/99 Samper v Parliament [2000] ECR'SC I'A'135 and II'611, paragraph 64, Joined Cases T-155/03, T-157/03 and T-331/03 Cwik v Commission [2005] ECR'SC I'A'411 and II'1865, paragraph 179).
50. In that regard, it is not sufficient to refer to certain facts in support of claims; evidence of a sufficiently specific, objective and consistent nature must also be adduced to support their truth or, at the very least, their probability, failing which the material accuracy of a party's statements cannot be challenged (see, by analogy, Case T-152/00 E v Commission [2001] ECR'SC I'A'179 and II'813, paragraph 69, and Cwik v Commission, paragraph 49 above, paragraph 180).
51. In the present case, the applicant has not presented any objective and relevant facts in support of his claim that the real purpose of his dismissal was to replace him by a new assistant who was wrongly recruited. On the contrary, it is clear from the facts that, in March 2003, the new assistant was recruited by the administrative department of the EAR to replace a member of staff who had left the EAR, while on 7 May 2003 the applicant signed Addendum No 4 to his contract, converting it into a contract for an indefinite period. The contract was terminated only on 27 February 2004, in other words, nearly a year after the recruitment of the new assistant. It follows that the applicant cannot claim that the new assistant was recruited by the EAR with the aim of creating overstaffing and terminating his contract.
52. Since the applicant has not presented evidence capable of establishing the existence of a misuse of powers, this plea in law must be rejected.

The plea alleging breach of the principle of sound administration

Arguments of the parties

53. The applicant claims that, in 2003, there were two posts in the administrative section where he was working. In March 2003, when the second post fell vacant, the Head of the Operational Centre in Skopje recommended in writing that that post be abolished. However, the appointing authority appointed a new assistant to that post. From then on, the post occupied by the applicant was under threat and, several months later, his contract was terminated for reasons related to overstaffing. According to the applicant, those circumstances show that the EAR, in its management of the administrative department, infringed the principle of sound administration, which presupposes reasonable management of human resources. Moreover, the applicant claims that the assistant recruited for the second post was employed on a fixed term contract which could be terminated without stating reasons in accordance with Articles 47 to 50 of the CEOS. Sound administration dictated the termination of that contract rather than that of the applicant.
54. The EAR contends that it has a broad discretion to organise its departments and that no rule concerning the management of staff required it to terminate the contract of another member of staff rather than that of the applicant. Contrary to what the applicant claims, Articles 47 to 50 of the CEOS contain no rule as to the manner in which the EAR is to manage its staff. The EAR could not therefore have infringed the principle of sound administration in applying those articles.
55. Moreover, in giving the applicant the option of transfer to Thessaloniki, the EAR tried to reach an amicable settlement to avoid the need to terminate the applicant's contract and, therefore, acted in accordance with the principle of sound administration by taking into account, in particular, the applicant's personal circumstances. In refusing the option of transfer, the applicant left the EAR no solution other than to dismiss him.

Findings of the Court

56. In accordance with the principle of sound administration, when the administration takes a decision concerning the situation of a member of staff, it must take into consideration all the factors which may affect its decision, and when doing so it should take into account not only the interests of the service but also those of the member of staff concerned (see, to that effect, Case T-11/03 Afari v ECB [2004] ECR'SC I'A'65 and II'267, paragraph 42, and Case F'28/06 Sequeira Wandschneider v Commission [2007] ECR'SC I'A'000 and II'000, paragraph 150).
57. In the present case, in a note of 28 February 2004 sent to the Head of the Operational Centre in Skopje, the applicant admitted that the EAR had offered him the option of a transfer to Thessaloniki rather than the termination of his contract. The contested decision was adopted only following the applicant's refusal of that transfer.
58. Thus, in terminating the applicant's contract only after offering him the option of a transfer to Thessaloniki, the EAR took into account not only the interests of the service but also those of the applicant.
59. Moreover, the EAR's choice to terminate the applicant's contract for an indefinite period rather than another member of staff's contract for a fixed period falls within the broad discretion which the EAR enjoys in the organisation of its departments.
60. Since it has not been established that there was a breach of the principle of sound administration, this plea in law must be rejected and, accordingly, the action must be dismissed in its entirety.

Costs

61. The judgment of the Court of First Instance, cited in paragraph 16 above, which ordered the EAR to pay the costs, has been set aside. In its judgment on appeal, the Court of Justice reserved the costs. It is thus for the Court of First Instance to make an order, in this judgment, on all the costs relating to the various proceedings, pursuant to Article 121 of the Rules of Procedure.
62. Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Article 88 of those rules provides, however, that in proceedings between the Communities and their servants the institutions are to bear its own costs.
63. Since the applicant has been unsuccessful before the Court of Justice and before the Court of First Instance in the proceedings following the referral back, each party must be ordered to bear its own costs.

On those grounds,

THE COURT OF FIRST INSTANCE (First Chamber)

hereby:

1. Dismisses the action;

2. Orders Mr Georgios Karatzoglou and the European Agency for Reconstruction (EAR) each to bear their own costs incurred before the Court of Justice and the Court of First Instance.

Tiili

Dehousse

Wiszniewska-Białecka

Delivered in open court in Luxembourg on 2 December 2008.

[Signatures]

---

* Language of the case: English.