JUDGMENT OF THE COURT OF FIRST INSTANCE (Third Chamber,Extended Composition)

16 July 1998 (1)

(Freelance conference interpreters — Lawfulness of levying Community tax ontheir remuneration)

In Joined Cases T-202/96 and T-204/96,

Andrea von Löwis and Marta Alvarez-Cotera, conference interpreters, residing inGeneva, Switzerland, represented by Gerard van der Wal, Advocate with the rightof audience before the Hoge Raad der Nederlanden and member of the BrusselsBar, with an address for service in Luxembourg at the Chambers of Aloyse May,31 Grand Rue,

applicants,

the second applicant being supported by

Federal Republic of Germany, represented by Ernst Röder, Ministerialrat, FederalMinistry of Economic Affairs, Bonn, Germany, acting as Agent,

intervener,

v

Commission of the European Communities, represented by Peter Oliver, of itsLegal Service, acting as Agent, with an address for service in Luxembourg at theoffice of Carlos Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

defendant,

APPLICATION for the repayment of the Community tax deducted from theapplicants' remuneration since 1 January 1989,

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Third Chamber, ExtendedComposition),

composed of: V. Tiili, President, C.P. Briët, K. Lenaerts, A. Potocki andJ.D. Cooke, Judges,

Registrar: A. Mair, Administrator,

having regard to the written procedure and further to the hearing on 5 May 1998,

gives the following

Judgment

Legal background

1.

    Under Article 13 of the Protocol on the Privileges and Immunities of the EuropeanCommunities of 8 April 1965 ('the Protocol‘):

'Officials and other servants of the Communities shall be liable to a tax for thebenefit of the Communities on salaries, wages and emoluments paid to them by theCommunities, in accordance with the conditions and procedure laid down by theCouncil, acting on a proposal from the Commission.

The shall be exempt from national taxes on salaries, wages and emoluments paidby the Communities.‘

2.

    Since 1970 the Commission has concluded with the Association Internationale desInterprètes de Conférence (International Association of Conference Interpreters,'AIIC‘), five-year framework agreements laying down the conditions of work andremuneration of freelance interpreters working for the Community institutions.

3.

    Under the first paragraph of Article 1 of the framework agreements, thoseagreements 'shall apply, irrespective of the place of employment, to freelanceconference interpreters engaged by the Commission under the conditions laid down

in the provisions concerning conference interpreters which may be applied by theinstitution where they work‘.

4.

    In the preamble to the framework agreement concluded on 9 December 1988 ('the1988 framework agreement‘), the contracting parties observed that the EuropeanParliament, pursuant to Article 78 of the Conditions of Employment of OtherServants of the European Communities ('the Conditions of Employment‘), leviedCommunity tax on the remuneration of freelance interpreters engaged on its behalf. The signatories of the 1988 framework agreement accordingly considered itdesirable, 'with reference solely to the tax provisions arising from the applicationof Article 78 of the Conditions of Employment, to guarantee equal treatment, fortax purposes, of all freelance interpreters‘.

5.

    Thus, Article 8 of the 1988 framework agreement, which entered into force on1 January 1989, provided that:

'Freelance interpreters engaged by the Commission on behalf of all the institutionsof the Community shall be liable to the tax for the benefit of the Communities,established by Article 13 of [the Protocol].

The preceding paragraph shall not apply to any person who is not a national of oneof the Member States of the Community, other than by derogation granted by theinstitution.‘

6.

    In order to take account of the particular situation of freelance interpreters residingin a non-member State, a third paragraph was added to Article 8 of the frameworkagreement concluded on 15 September 1994 and covering the period from1 January 1994 to 31 December 1998 ('the 1994 Agreement‘), which provides:

'Where remuneration paid by the Commission is subject to tax in a non-memberState and by way of derogation from the first paragraph, the amount of theCommunity tax as deducted shall, upon production of documentary evidence, berefunded to the freelance interpreter up to an amount equal to the national tax.‘

7.

    So far as concerns the settlement of individual disputes, Article 23 provides that,should it prove impossible to settle a dispute by way of the pre-litigation proceduredescribed in Article 22, the freelance interpreter concerned may bring the matterbefore the Court of Justice, which is given jurisdiction in that regard, pursuant toArticle 42 of the ECSC Treaty, Article 181 of the EC Treaty and Article 153 of theEAEC Treaty, by the contracts under which such interpreters are engaged.

8.

    The second paragraph of Article 23 provides that, subject to the provisions of theagreement and annexes thereto and of the individual contracts by which they areengaged, Belgian law governs the contractual relations between freelanceinterpreters and the institutions.

9.

    In practice, freelance conference interpreters are engaged at short notice bytelephone or by fax for a period generally limited to a few days. The contract issubsequently formalised by written confirmation signed by both parties.

10.

    It is clearly stated in that confirmation that the engagement is governed both by therules concerning freelance conference interpreters adopted by the institution towhich the person concerned provides his or her services and by the frameworkagreement in force. The confirmation also refers to the arbitration clauseconferring jurisdiction contained in Article 23 of that framework agreement.

Facts

11.

    Ms von Löwis is German and Ms Alvarez-Cotera is Spanish and Swiss. They havebeen resident in Switzerland since 1964 and 1970 respectively. They both work asfreelance interpreters for the Community institutions; Ms Von Löwis has workedbetween 125 and 135 days per year since 1973 and Ms Alvarez-Coteraapproximately 40 to 50 days per year since March 1986.

12.

    Because the Commission has been deducting Community tax from theremuneration of freelance interpreters since 1 January 1989, the applicants arepotentially subject to double taxation on that remuneration because of their liabilityto Swiss income tax.

13.

    In accordance with the first paragraph of Article 22 of the 1994 frameworkagreement, Ms Alvarez-Cotera and Ms Von Löwis requested the Commission, on23 April 1996 and 8 July 1996 respectively, to refund the Community tax paid bythem since 1989.

14.

    After meeting with a refusal from the Director of the Conferences Directorate ofthe Joint Interpreting and Conference Service, the applicants referred identicalrequests to the relevant Directors General.

15.

    By decisions of 25 September 1996 and 21 October 1996, those requests, too, wererejected, on the ground that the applicants had, prior to 1994, provided theirservices as interpreters in full knowledge of the framework agreements concludedwith the AIIC and that the third paragraph of Article 8, inserted by the 1994Agreement, could have an effect only on services provided after 1994. For thepurpose of refunding the Community tax under the latter provision, theCommission required the production of documentary evidence of the paymentsactually made to the Swiss tax authority.

Procedure

16.

    By applications lodged at the Court Registry on 9 December 1996, the applicantsbrought the present actions for repayment of the Community tax.

17.

    On 22 May 1997 the Federal Republic of Germany applied for leave to intervenein Case T-204/96 in support of the form of order sought by the applicant. Thatapplication was granted by order of 11 July 1997.

18.

    By order of 18 November 1997 Cases T-202/96 and T-204/96 were joined, pursuantto Article 50 of the Rules of Procedure, for the purposes of the oral procedure andthe judgment.

19.

    The cases, which had originally been assigned to the Third Chamber, were referredto the Third Chamber, Extended Composition, by decision of the Court of4 February 1998, taken in accordance with Articles 14 and 51 of the Rules ofProcedure.

20.

    Upon hearing the report of the Judge-Rapporteur, the Court of First Instance(Third Chamber, Extended Composition) decided to open the oral procedure. Asa measure of organisation of the procedure, it requested the Commission toprovide certain information.

21.

    The parties presented oral argument and replied to the Court's questions at thehearing which took place on 5 May 1998.

Forms of order sought

22.

    The applicants claim that the Court should:

—    declare the actions admissible;

—    annul the decisions of 25 September and 21 October 1996;

—    declare the application of Community tax to the applicants unlawful and/ordeclare Article 8 of the framework agreement null and void;

—    order repayment of the Community tax withheld by the Commission and/orpaid by the applicants since 1 January 1989 until the date of the judgmentto be given in this case, together with interest at the rate of 8% or as laiddown by law;

—    order the Commission to pay the costs.

23.

    The Commission contends that the Court should:

—    dismiss the actions;

—    order the applicants to pay the costs.

24.

    The intervener in Case T-204/96 asks the Court to grant the applicant's claim forrepayment of the Community tax.

The legal nature of the employment relationship of the applicants

25.

    It is clear — and it is not in dispute between the parties — that as freelanceinterpreters engaged under contracts for short periods, which are renewed on afrequent basis from year to year, the applicants are not to be regarded as officialsor servants of the Communities within the meaning of the Conditions ofEmployment (Case 43/84 Maag v Commission [1985] ECR 2581, paragraph 23,Case 111/84 Institut National d'Assurances Sociales pour Travailleurs Indépendantsv Cantisani [1985] ECR 2671, paragraph 13), but rather as persons having acontractual relationship with the Commission, determined by terms and conditionsof a private-law nature which are, by virtue of Article 23 of the frameworkagreements, governed by Belgian law with regard to all those matters not coveredby the individual contracts by which they are engaged and the frameworkagreements.

26.

    It follows that the present actions are based on contract.

Admissibility

The plea of lack of competence of the Court of First Instance

Arguments of the parties

27.

    The Commission argues that the Court of First Instance has no jurisdiction to hearand determine the two actions in so far as they relate to individual contractsconcluded prior to 1 August 1993, which should have formed the subject-matter ofa separate action before the Court of Justice. The second paragraph of Article 3of Council Decision 93/350/Euratom, ECSC, EEC of 8 June 1993 amending CouncilDecision 88/591/ECSC, EEC, Euratom establishing a Court of First Instance of theEuropean Communities (OJ 1993 L 144, p. 21, 'the Council Decision‘) limits thejurisdiction conferred on the Court of First Instance in actions brought, as in thepresent case, by natural persons under an arbitration clause to disputes relating tothe performance only of contracts concluded after its entry into force on 1 August1993.

28.

    The applicants, supported, in substance, by the intervener, contend that the Courtof First Instance has jurisdiction over their actions since they were brought after the

entry into force of the 1994 framework agreement and they concern a continuouslegal relationship with the Commission composed of multiple short-term contractswhich cannot properly be considered separately.

Findings of the Court

29.

    The present actions raise the issue of the lawfulness of levying Community tax,under identical provisions of the two framework agreements applicable from 1989to 1994 and from 1994 to 1998 respectively, on the remuneration which theCommission paid to the applicants under a series of essentially identical individualcontracts concluded after 1 January 1989.

30.

    In those circumstances, it is appropriate from the point of view of the soundadministration of justice and the judicial protection of the applicants that the Courtof First Instance should hear and determine the dispute as a whole, irrespective ofwhether the individual contracts by which they are engaged were concluded beforeor after the entry into force of the Council Decision (cf. the judgment in Case109/81 Porta v Commission [1982] ECR 2469, paragraph 10).

31.

    The plea of lack of competence raised by the Commission must therefore berejected.

The plea of inadmissibility alleging confusion of remedies

32.

    The Commission accuses the applicants, in substance, of attempting to blur thefundamental distinction between a remedy which is contractual in nature and anaction for annulment. In particular, the applicants are not entitled to characterisethe final measures taken by the Commission in the pre-litigation procedureprescribed by the contract as decisions nor to seek their annulment.

33.

    The applicants reply that their claims cannot be viewed as being confined todisputes of a private-law nature because, by proceeding — unlawfully — to levy theCommunity tax, the Commission acted not as a party to a contract but as a publicauthority.

34.

    Here, the Court need merely note that, as is clear from their claims, the applicantsare asking it, in accordance with the contractual nature of the present disputes, toorder the Commission to repay the Community tax, alleging that there is no legalbasis for the provisions of the framework agreements on foot of which the tax hasbeen withheld.

35.

    It follows that the plea of inadmissibility raised by the Commission cannot beupheld.

The pleas of inadmissibility alleging breach of the Rules of Procedure

36.

    The Commission observes, in the first place, that the applicants failed, contrary toArticle 44(5a) of the Rules of Procedure, to append to their application a copy ofall their contracts of employment containing the arbitration clause.

37.

    The applicants reply that they duly lodged, with their application, both theapplicable framework agreements and a copy of the contracts by which they wereengaged, in compliance with the abovementioned provision.

38.

    The Court finds that the applicants correctly appended to their application a copyof the contracts under which they were engaged, containing the arbitration clause,as provided for in Article 44(5a) of the Rules of Procedure, and that, in view of theessential similarity of their provisions, they were under no obligation to produce allthe contracts subsequently concluded.

39.

    Secondly, the Commission criticises the applicants for not having specified theprecise amount of the Community tax withheld from their income.

40.

    The applicants point out that what they are challenging is the actual principle ofthe application of Community tax to their remuneration, and submit that theabsence of precise figures cannot render their actions inadmissible.

41.

    The Court considers that proceedings have been validly instituted before it with aview to obtaining a ruling both on the actual principle of whether the levying ofCommunity tax by the Commission is lawful and on the claims for repayment. Itis not disputed that the latter concern sums which the Commission itself withheldand which it is necessarily able to determine.

42.

    Thirdly, the Commission claims that the applicants have not even attempted toshow by what rule of law they may challenge Article 8 of the two relevantframework agreements, in manifest breach of the obligation to state 'a summaryof the pleas in law on which the application is based‘, imposed by Article 44(1)(c)of the Rules of Procedure.

43.

    The applicants, however, consider that they have adequately set out the reasonswhy they consider that the Commission wrongly applied Article 8 of the frameworkagreements to them.

44.

    The Court considers that the applicants have clearly asserted, referring to therelevant provisions of Community law, that the Commission had no power towithhold the tax in issue.

45.

    In those circumstances, the pleas of inadmissibility alleging breach of the Rules ofProcedure must be rejected.

The plea of inadmissibility alleging acquiescence of the applicants in the levying of theCommunity tax

46.

    The Commission states that the applicants had accepted that they were liable toCommunity tax since 1989 and now seek repayment of that tax after having waitedseveral years before bringing their action.

47.

    This plea must be considered with the substance of the case, of which it is anintegral part.

Substance

Arguments of the parties

48.

    The applicants, supported in substance by the intervener in Case T-204/96, pointout that, on the basis of Article 13 of the Protocol, the Council laid down theconditions and detailed rules for applying the Community tax to the remunerationspaid by the Communities to their officials and other servants in Regulation (EEC,Euratom, ECSC) No 260/68 of 29 February 1968 laying down the conditions andprocedure for applying the tax for the benefit of the European Communities (OJ1968 L 56, p. 8).

49.

    Since freelance interpreters are neither officials of the Communities nor otherservants within the meaning of the Conditions of Employment, the Commissioncommitted a manifest error in law in deducting the Community tax from theirremuneration, in reliance on Article 8 of the framework agreements, when thoseagreements were concluded with an international association governed by privatelaw and are themselves governed by civil law.

50.

    The Commission contends that the basis on which freelance interpreters are liableto Community tax is contractual, so that, by reason of the principle pacta suntservanda, the applicants may not challenge the lawfulness of their contracts in theabsence of any fraud, mistake, duress or similar defect. The Commission considers,moreover, that Article 8 of the framework agreements cannot be severed from itsother provisions.

Findings of the Court

51.

    The first paragraph of Article 13 of the Protocol established a tax for the benefitof the Communities on the remuneration paid to officials and other servants by theCommunities.

52.

    On the basis of that provision, Article 2 of Council Regulation No 260/68 stipulatedthat persons coming under the Staff Regulations or the Conditions of Employment,with the exception of local staff, were to be liable to that Community tax.

53.

    Since, as freelance interpreters, the applicants cannot be considered either asofficials or as servants within the meaning of the Conditions of Employment, theCommission could not lawfully levy Community tax on the remuneration which ithas paid to them since 1 January 1989.

54.

    Moreover, it is clear from the scheme of Article 13 of the Protocol that the liability,under the first paragraph, of officials and other servants of the Communities toCommunity tax on remuneration paid to them by the Communities necessarily hasthe corollary, expressed in the second paragraph, of exempting those concernedfrom national taxes on those same amounts.

55.

    That principle is stated more specifically in Article 2(a) of Regulation (Euratom,ECSC, EEC) No 549/69 of the Council of 25 March 1969 determining thecategories of officials and other servants of the European Communities to whomcertain provisions of the Protocol apply (OJ 1969 L 74, p. 1), as subsequentlyamended, according to which the provisions of the second paragraph of Article 13of the Protocol apply, save for local staff, only to persons coming under the StaffRegulations or the Conditions of Employment.

56.

    It follows that the remuneration paid by the Commission to the applicants fallsunder the tax jurisdiction of the Member States.

57.

    Thus the Commission, by levying the Community tax at issue, also failed to takeaccount of the tax jurisdiction retained by the Member States.

58.

    The applicants' claims for repayment must therefore be upheld, without there beingany need to consider the pleas of inadmissibility which the Commission has basedon the applicants' alleged consent to the Community tax being levied and on thenon-severability of the provisions of the framework agreements (see paragraph 50above). Neither the will of the parties nor the balance in the structure of anagreement may validly be invoked in order to secure the performance or continuedperformance of unlawful obligations.

59.

    It follows from the foregoing that the Commission must be ordered to repay to theapplicants the sums referred to as Community tax which it has unlawfully levied ontheir remuneration paid since 1 January 1989, together with interest at the statutoryrate applicable in Belgium, to run from the date of the first application forrepayment submitted by each of the applicants respectively (see paragraph 13above) until payment is actually made.

Costs

60.

    Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs, if they have been asked for in the successful party'spleadings. Since the Commission has been unsuccessful, it must be ordered to paythe costs in accordance with the form of order sought by the applicant.

61.

    The Federal Republic of Germany, which has intervened in Case T-204/96, mustbear its own costs pursuant to the first subparagraph of Article 87(4) of the Rulesof Procedure.

On those grounds,

THE COURT OF FIRST INSTANCE (Third Chamber, Extended Composition)

hereby:

1.    Orders the Commission to repay to the applicants the sums referred to asCommunity tax which it has unlawfully levied on their remuneration paidsince 1 January 1989, together with interest at the statutory rate applicablein Belgium, to run from the date of the first application for repaymentsubmitted by each of the applicants respectively until payment is actuallymade;

2.    Dismisses the remainder of the applicants' claims;

3.    Orders the Commission to pay the costs;

4.    Orders the Federal Republic of Germany to pay its own costs.

Tiili Briët Lenaerts Potocki Cooke

Delivered in open court in Luxembourg on 16 July 1998.

H. Jung

V. Tiili

Registrar

President

1: Language of the case: English.