JUDGMENT OF THE COURT OF FIRST INSTANCE (Fifth Chamber)

30 September 1998 (1)

(Action for annulment — System of payment for the members of the Court ofAuditors — Departure from office — Pension — No increase — Infringement of thebasic regulation — Statement of reasons — Legitimate expectations — Principle ofnon-discrimination)

In Case T-121/97,

Richie Ryan, former member of the Court of Auditors of the EuropeanCommunities, resident in Dublin, represented by Georges Vandersanden, of theBrussels Bar, with an address for service in Luxembourg at the offices of FiduciaireMyson SARL, 30 Rue de Cessange,

applicant,

v

Court of Auditors of the European Communities, represented by Jean-MarieStenier, Jan Inghelram and Paolo Giusta, of its Legal Service, acting as Agents,with an address for service in Luxembourg at the seat of the Court of Auditors,12 Rue Alcide de Gasperi, Kirchberg,

defendant,

supported by

Council of the European Union, represented by Jean-Paul Jacqué and ThérèseBlanchet, of its Legal Service, acting as Agents, with an address for service inLuxembourg at the office of Alessandro Morbilli, Director-General of the LegalAffairs Directorate of the European Investment Bank, 100 Boulevard KonradAdenauer,

intervener,

APPLICATION for the annulment of the decision of the Court of Auditors of20 February 1997 setting the rate of the applicant's pension with effect from1 March 1997,

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Fifth Chamber),

composed of: J. Azizi, President, R. García-Valdecasas and M. Jaeger, Judges,

Registrar: B. Pastor, Principal Administrator,

having regard to the written procedure and further to the hearing on 12 May 1998,

gives the following

Judgment

Relevant provisions

1.

    Article 9(1) of Council Regulation (EEC, Euratom, ECSC) No 2290/77 of18 October 1977 determining the emoluments of the members of the Court ofAuditors (OJ 1977 L 268, p. 1) provides that 'after ceasing to hold office, membersof the Court of Auditors shall be entitled to a pension for life payable from thedate when they reached the age of 65 years‘.

2.

    The first paragraph of Article 10 of that regulation states that the amount of thepension of members of the Court of Auditors is to be 4.5% of the basic salary lastreceived for each full year in office and one-twelfth of that sum for each completemonth, the maximum pension being 70% of the basic salary last received.

3.

    Under Article 2, the basic monthly salary of members of the Court of Auditors isto be equal to the amount resulting from the application of, in the case of the

president, a percentage of 108%, and in the case of the other members, apercentage of 104%, to the basic salary of an official of the European Communitiesin the last step of Grade A 1.

4.

    Article 18 provides:

'Should the Council decide to increase the basic salary, it shall at the same timedecide on an appropriate increase in the rates of existing pensions.‘

5.

    Article 8(1) provides that for three years from the first day of the month followingthat in which he ceases to hold office, a former member of the Court of Auditorsis to receive a monthly transitional allowance which varies, depending on the lengthof his service, from 35% to 60% of the basic salary which he was receiving whenhe ceased to hold office.

6.

    Article G(6) of the Treaty on European Union, which entered into force on1 November 1993, conferred on the Court of Auditors the status of Communityinstitution.

7.

    On 10 April 1995 the Council adopted Regulation (EC, Euratom, ECSC)No 840/95 amending Regulation No 2290/77 (OJ 1995 L 85, p. 10). The secondrecital in the preamble to that regulation states that, following the entry into forceof the Treaty on European Union, the Court of Auditors became an institution ofthe European Communities and it therefore seemed desirable to amend theprovisions of Regulation No 2290/77. Regulation No 840/95 entered into force on20 April 1995 and, in accordance with the second paragraph of Article 3, was toapply from 1 May 1995.

8.

    Regulation No 840/95 amends Article 2 of Regulation No 2290/77 by increasing thebasic monthly salary of the President of the Court of Auditors from 108% to 115%,and that of the other members from 104% to 108%, of the basic salary of anofficial of the European Communities in the last step of Grade A 1.

9.

    It also amends Article 8 of Regulation No 2290/77 by increasing the monthlytransitional allowance of former members of the Court of Auditors to an amountwhich varies, depending on the length of service of the member concerned, from40% to 65% of the basic salary which the member was receiving when he ceasedto hold office.

10.

    Article 2 of Regulation No 840/95 provides:

'Pensions acquired on the date of entry into force of this regulation shall not bealtered by this regulation.‘

Facts

11.

    The applicant was a member of the Court of Auditors from 18 May 1986 to9 February 1994.

12.

    For a period of three years after ceasing to hold office, that is to say until February1997, he received a monthly transitional allowance pursuant to Article 8 ofRegulation No 2290/77.

13.

    Being entitled to draw his pension from 1 March 1997, he received for the firsttime, annexed to a letter of 20 February 1997 from the Secretary-General of theCourt of Auditors, the slip on which the net amount of his pension was calculated.

14.

    He was then able to establish that his pension had been calculated by reference toa basic monthly salary which had been ascertained in accordance with the formerversion of Article 2 of Regulation No 2290/77 and was therefore equal to theamount resulting from the application of a percentage of 104% to the basic salaryof an official of the European Communities in the last step of Grade A 1.

Procedure and forms of order sought

15.

    It was in those circumstances that, by application lodged at the Registry of theCourt of First Instance on 16 April 1997, the applicant brought this action pursuantto the fourth paragraph of Article 173 of the EC Treaty.

16.

    By application lodged at the Registry of the Court of First Instance on 29 July1997, the Council sought leave to intervene in support of the form of order soughtby the Court of Auditors. By letter lodged at the Registry of the Court on 12September 1997, the applicant requested that certain documents annexed to theCourt of Auditors' defence be treated as confidential vis-à-vis the Council.

17.

    By order of the President of the Fifth Chamber of the Court of 20 November 1997,leave to intervene was granted and the request for confidential treatment wasrejected.

18.

    Upon hearing the Report of the Judge-Rapporteur, the Court (Fifth Chamber)decided to open the oral procedure.

19.

    At the hearing on 12 May 1998 the parties presented argument and answered oralquestions put to them by the Court.

20.

    The applicant claims that the Court should:

—    annul the decision of the Court of Auditors of 20 February 1997determining his pension with effect from 1 March 1997:

—    order the Court of Auditors to pay all the costs.

21.

    The defendant contends that the Court should:

—    dismiss the action as unfounded;

—    make an appropriate order as to costs.

22.

    The intervener supports the form of order sought by the defendant.

Substance

23.

    In support of his action, the applicant essentially pleads, in the first place, that theCourt of Auditors misinterpreted Article 2 of Regulation No 840/95 and, secondly,that Regulation No 840/95 is unlawful.

The plea alleging that the Court of Auditors misinterpreted Article 2 of Regulation No840/95

Arguments of the parties

24.

    The applicant raises the question of the meaning of the term 'pensions acquises‘ in Article 18 of Regulation No 2290/77 ('existing pensions‘) and Article 2 ofRegulation No 840/95 ('pensions acquired‘) which, he asserts, is ambiguous andopen to differing interpretations. In his view, it refers to pensions which haveactually been determined, thus including those which are already being paid. Hededuces from that interpretation that Regulation No 840/95 does not apply in hiscase because the pension awarded to him did not actually begin to be paid untilMarch 1997, thus after that regulation had entered into force. He adds that if itwere necessary to define 'pensions acquises‘ differently, several possibilities couldbe envisaged. The pension could be acquired either from the first day of themonth following the departure from office or from the end of the three-year periodduring which former presidents and members of the Court of Auditors receive amonthly transitional allowance. The applicant also refers to the difference betweenthe English versions of Article 18 of Regulation No 2290/77 and Article 2 ofRegulation No 840/95. The former refers to existing pensions, which suggests thatpensions which are actually being paid are at issue. The latter refers to acquiredpensions, corresponding to the French wording which is identical in bothregulations, and is just as ambiguous.

25.

    The applicant concludes that, since the term 'pensions acquises‘ is imprecise, itshould be given the definition most favourable to him, that is to say the definitionunder which pensions are acquired only once they are paid. As the applicant's

pension was not determined, in the sense that it was not paid, before the date onwhich Regulation No 840/95 was first applied, namely 1 May 1995, Article 2 of thatregulation does not govern his case.

26.

    The applicant considers it to be logical and consistent with the system of paymentestablished by Regulation No 2290/77 in respect of the period after a president ormember of the Court of Auditors has ceased to hold office to regard a pension asacquired only if two conditions are met. First, the person concerned must haveceased to hold office at the Court of Auditors. Secondly, he must actually bedrawing his pension, whether he has requested that it be paid early from the ageof 60, or he has reached normal retirement age, that is to say the age of 65, or elsepayment of the monthly transitional allowance, which he receives for three years,causes him to pass the age of 65. The applicant is in the last of those situations.

27.

    The applicant concludes that Article 2 of Regulation No 840/95 does not apply tohis situation.

28.

    The defendant considers that the effect of the wording of Article 9 of RegulationNo 2290/77 is that entitlement to a pension arises, and the pension is acquired,when the member ceases to hold office. The view that the pension is not acquireduntil it is paid for the first time is contrary to the wording of Article 9 ofRegulation No 2290/77, on the one hand, and leads to logical inconsistencies, onthe other. When a member ceases to hold office, entitlement to a pension isestablished and the amount of the pension is ascertainable; only the date when itis first paid remains to be chosen by him.

29.

    The intervener has made no observations on the first plea.

Findings of the Court

30.

    The applicant essentially claims that the term 'pensions acquired‘ used in Article 2of Regulation No 840/95 must be given the meaning most favourable to him. Hispension has been paid from 1 March 1997. It is thus in his interest for his pensionnot to have been acquired, within the meaning of Article 2 of RegulationNo 840/95, until after the date on which that regulation was first applied, that is tosay until after 1 May 1995. He therefore suggests that 'pensions acquired‘ shouldbe understood as referring to pensions which are actually being paid.

31.

    The Court finds that the interpretation put forward by the applicant cannot bereconciled with the wording of Regulation No 2290/77, whose effect is thatentitlement to a pension arises, and the pension is therefore acquired, on the daywhen the member ceases to hold office.

32.

    First, Article 9(1) of that regulation provides that, after ceasing to hold office,members of the Court of Auditors are to be entitled to a pension for life payable

from the date on which they reach the age of 65. Under Article 9(2) membersmay, however, ask to start drawing that pension from the age of 60. It follows thatthe regulation distinguishes between the moment at which entitlement to a pensionarises, namely the day on which the member ceases to hold office, and the later orconcomitant moment from which the former member begins to enjoy thatentitlement, namely the day on which he reaches the age of 60 or 65.

33.

    Secondly, under Article 10 of Regulation No 2290/77 the amount of the pension iscalculated on the basis of the basic salary last received. As is evident fromArticle 1 of that regulation, a member's entitlement to a basic salary comes to anend when he ceases to hold office. Payment of the basic salary last received, thecriterion for determining pension entitlement, thus constitutes a single event fixedin time, concomitant with the departure from office.

34.

    In addition, the interpretation suggested by the applicant leads, as the defendanthas rightly maintained, to logical inconsistencies. The pension due is calculated,pursuant to Article 10 of Regulation No 2290/77, on the basis of the last salaryreceived. If 'pensions acquises‘ within the meaning of Article 18 of RegulationNo 2290/77 and Article 2 of Regulation No 840/95 were ascertained only when theywere paid and on the basis of the basic salary applying on that date, the salaryserving as a basis for the calculation of the amount of the pension would no longerbe the basic salary last received, as Article 10 of Regulation No 2290/77nevertheless provides.

35.

    It follows that the interpretation put forward by the applicant cannot be upheld.

36.

    As to the applicant's argument concerning the linguistic divergence between theEnglish versions of, on the one hand, Article 18 of Regulation No 2290/77('existing pensions‘) and, on the other, Article 2 of Regulation No 840/95('pensions acquired‘), it is sufficient to point out, first, that, according to settledcase-law, Community provisions must be interpreted and applied uniformly in thelight of the versions existing in the other Community languages (Case C-219/95 PFerriere Nord v Commission [1997] ECR I-4411, paragraph 15). The need for auniform interpretation of the language versions requires, in the case of divergencebetween them, that the provision in question be interpreted by reference to thepurpose and general scheme of the rules of which it forms part (Case C-72/95Kraaijeveld and Others v Gedeputeerde Staten van Zuid-Holland [1996] ECR I-5403,paragraph 28). Furthermore, the two terms may be synonymous since a pensionentitlement which has been acquired necessarily exists and a pension may existwithout being paid. On the other hand, if the term 'existing pensions‘ in theEnglish version of Article 18 of Regulation No 2290/77 were to be translated as'pensions liquidées‘ ('pensions being paid‘) instead of 'pensions acquises‘, it woulddiverge substantially from the other language versions of the same article, which arealso authentic. It follows that that linguistic divergence does not allow Article 18

of Regulation No 2290/77 to be interpreted as referring to pensions which arebeing paid rather than pensions which have been acquired.

37.

    The plea alleging that the Court of Auditors misinterpreted Article 2 of RegulationNo 840/95 must therefore be rejected.

The plea alleging that Regulation No 840/95 is unlawful

38.

    The plea alleging that Regulation No 840/95 is unlawful has three limbs, namelythat Article 18 of Regulation No 2290/77 was infringed, that the principle of non-discrimination was infringed and that the principle of the protection of legitimateexpectations was infringed.

The first limb, alleging infringement of Article 18 of Regulation No 2290/77

—    Arguments of the parties

39.

    The applicant takes the view that Article 2 of Regulation No 840/95 is incompatiblewith Article 18 of Regulation No 2290/77. It follows from the wording of Article 18that when the Council increases the basic salary it must at the same time adopt adecision making the appropriate increase in the rates of acquired pensions. TheCouncil has a discretion as to the amount of the increase. However, it cannot,without infringing that article, fail to take a decision increasing the rates of acquiredpensions if it increases the basic salary. Regulation No 840/95 offends against thespirit and wording of Article 18 of Regulation No 2290/77 and fails to have regardto the fact that pensions are generally regarded as an extension of salary.

40.

    The applicant notes that, on the one hand, Article 1 of Regulation No 840/95increases the basic salary and monthly transitional allowance of presidents andmembers of the Court of Auditors. The only reason given for that increase is theentry into force of the Treaty on European Union, conferring on the Court ofAuditors the status of Community institution. On the other hand, Article 2 of thatregulation expressly provides that acquired pensions will not be increased.

41.

    The applicant submits, first, that no specific reason is set out for the failure ofRegulation No 840/95 to increase acquired pensions. Secondly, the stated reasonfor the increase in the basic salary and the transitional allowance is purely formaland cannot in itself explain the failure to increase acquired pensions. The increasein the basic salary and transitional allowance without an increase in acquiredpensions at the same time breaks with the Council's previous consistent practiceand infringes Article 18 of Regulation No 2290/77; there is therefore no validstatement of reasons for it.

42.

    Furthermore, the date on which Regulation No 840/95 entered into force does notcorrespond to the date on which the Court of Auditors became an institution withinthe meaning of Article 4 of the EC Treaty, as amended by Article G(6) of theTreaty on European Union. The Treaty on European Union entered into force on1 November 1993, thus at a time when the applicant was still in office. Therefore,the reasoning used to justify the increase in the salaries and transitional allowancesof presidents and members of the Court of Auditors should also apply to theapplicant and, a fortiori, result in an increase in his pension entitlement. There isaccordingly a glaring contradiction between the statement of reasons for RegulationNo 840/95 and its effects on the applicant's position.

43.

    The applicant concludes that Article 2 of Regulation No 840/95 is unlawful sinceit conflicts with Article 18 of Regulation No 2290/77.

44.

    The defendant concedes that, in accordance with Article 18 of RegulationNo 2290/77, when the Council amended that regulation by adopting RegulationNo 840/95 it was required to take a decision on an increase in the rates of acquiredpensions. It considers that the Council fulfilled that obligation by providing inArticle 2 of Regulation No 840/95 that the appropriate increase in the rates ofacquired pensions was nil. Article 2 of Regulation No 840/95 satisfies therequirements of Article 18 of Regulation No 2290/77. First, Article 2 of RegulationNo 840/95 was adopted at the same time as the decision to increase salaries laiddown in Article 1 of that regulation. Secondly, Article 18 of Regulation No 2290/77requires a decision on an appropriate increase, hence a decision as to whether anappropriate increase should be made. It therefore does not necessarily require anincrease to be decided upon. Thirdly, Article 18 of Regulation No 2290/77 obligesthe Council to decide on an 'appropriate increase‘, that is to say an increase whichcorresponds to the circumstances of the case justifying its decision to increasesalaries. In this case, the Council decided that the increase in the rates of acquiredpensions which appeared to it to correspond to the circumstances of the case andto the reasons for an increase in salaries was nil.

45.

    The defendant considers that the reasoning given for Article 2 of RegulationNo 840/95 is correct and sufficient. That reasoning derives, first and foremost,from the fact that Article 2 directly applies a parent provision, namely Article 18of Regulation No 2290/77. It derives, secondly and indirectly, from the reason forthe increase in salaries, decided upon in Article 1 of Regulation No 840/95, whichresulted from the Court of Auditors' attaining the status of institution. Thedefendant refers in that regard to the settled case-law according to which thestatement of reasons for a regulation may simply set out the general situation whichled to its adoption, having regard to the regulation's context (Case 5/67 Beus vHauptzollamt München [1968] ECR 83, at p. 95, and Case 80/72 KoninklijkeLassiefabrieken v Hoofdproduktschap voor Akkerbouwprodukten [1973] ECR 635).

46.

    The intervener draws attention to the particular and exceptional nature of thecircumstances which led to the decision to increase the salaries of members of theCourt of Auditors. For both the Court of Auditors itself and the Council, the pointwas to take account of the fact that the Court of Auditors had attained the statusof Community institution. It is therefore not an increase of the kind whichordinarily occur by reason, for example, of an increase in an index or a similarcircumstance. Indeed, that type of increase is granted to the members of the Courtof Auditors simply by reason of an increase in the base for calculating theirremuneration, namely the salary of an official in the last step of Grade A 1.

47.

    From that perspective, it is perfectly logical for the increase to take effect in thefuture only and not to apply to acquired pensions. Such pensions are an extensionof salary in so far as they are based on the last salary received. For members whoceased to hold office before Regulation No 840/95 was applied to them, that lastsalary is equal to 104%, and not 108%, of the salary of an official in the last stepof Grade A 1.

48.

    The intervener considers that it complied in full with the obligation imposed on itby Article 18 of Regulation No 2290/77 to take a decision on acquired pensions. That decision was taken in the form of Article 2 of Regulation No 840/95. Article 18 of Regulation No 2290/77 was therefore not infringed.

49.

    The intervener challenges the applicant's argument that the reasoning concerningthe Court of Auditors' becoming a Community institution is purely formal andcannot in itself justify a contravention of Article 18 of Regulation No 2290/77 sincethat is not an objective criterion and there is no link between the Court ofAuditors' attainment of the status of institution and the increase in salaries. It isclear from the background to the adoption of Regulation No 840/95 that theattainment by the Court of Auditors of the status of Community institution was asubstantive reason which justified fully, and by itself, the decision by the Council toincrease the salaries and transitional allowances of the members of that newinstitution. The objective was to ensure a degree of balance between the levels ofpay of members of the various institutions.

50.

    Furthermore, since the Court of Auditors' attaining the status of institution was theonly ground for Regulation No 840/95, it was neither necessary nor justified to statereasons for that regulation other than by the second recital in its preamble. Itfollows from that change of status that acquired pensions are not affected by theincrease. There is therefore no need for a specific reference to it in the preamble.

51.

    The intervener concludes that the duty to state reasons laid down by Article 190of the Treaty was fully complied with in this case and that the first limb of thesecond plea, that Regulation No 2290/77 was infringed by Article 2 of RegulationNo 840/95, must be rejected as unfounded.

—    Findings of the Court

52.

    In order for Article 18 of Regulation No 2290/77 to apply, the Council must havedecided to increase the basic salary. It is not in dispute that, by Article 1 ofRegulation No 840/95, the Council increased the basic salary of the President andmembers of the Court of Auditors.

53.

    Furthermore, Regulation No 840/95 did not repeal Article 18 of RegulationNo 2290/77. Accordingly, when the Council adopted Regulation No 840/95 it wasobliged to comply with Article 18 of Regulation No 2290/77.

54.

    Article 18 requires the Council, first, to take a decision on pensions at the sametime as the decision increasing the basic salary. It is common ground that theCouncil complied with that obligation by adopting Article 2 of RegulationNo 840/95.

55.

    Article 18 requires the Council, secondly, to give that decision a specified subject-matter, since it has to relate to 'an appropriate increase in the rates of existingpensions‘.

56.

    That wording calls for a twofold conclusion. First, by providing that the Councilis to 'decide on an ... increase‘ ['prend ... une décision sur une augmentation‘]instead of providing that it is to make an increase, Article 18 obliges the Councilmerely to examine whether such an increase is desirable. By contrast, it does notimpose a general obligation on it to decide, following that examination, to increaseacquired pensions.

57.

    Secondly, when the Council considers whether it is desirable to increase pensionsit must proceed in a particular direction. Article 18 of Regulation No 2290/77requires the Council to decide on an 'appropriate‘ increase in the rates ofpensions. That wording means, on the one hand, that the pension increaseprovided for, the subject-matter of the decision, does not necessarily have to be thesame as the increase in the basic salary. It thus gives the Council a degree oflatitude. On the other hand, it also expresses the idea that the Council must seekto ascertain what, in the circumstances, constitutes the 'appropriate‘ increase inacquired pensions.

58.

    Normally the appropriate increase in the rates of acquired pensions will be thesame as the increase in the basic salary. In exceptional cases, and depending onthe circumstances, a smaller, or even much smaller, increase in the rates ofpensions than in the basic salary may, nevertheless, be appropriate and justified. Very exceptionally, and in the light of highly specific circumstances, an appropriateincrease in the rates of acquired pensions may even be nil.

59.

    When assessing whether an increase in the rates of acquired pensions isappropriate, the Council has a discretion, which is, however, subject to review bythe Court of First Instance. When the Court carries out that review in the light of,inter alia, general principles of Community law, it necessarily applies itself toanalysing the reasons given in the regulation as to why an increase in the rates ofacquired pensions is appropriate. While the Council is not required to explain ina particular way why an increase in the rates of acquired pensions is appropriatewhen that increase is the same as the increase in the basic salary, that is not so inthe exceptional cases where the increase in the rates of acquired pensions is muchsmaller than the increase in the basic salary and, all the more so, in the entirelyexceptional case where the Council considers that it is appropriate not to increasethe rates of acquired pensions at all. It is therefore necessary to ascertain whether,in this case, Article 2 of Regulation No 840/95 satisfies the above requirements inso far as it provides that 'pensions acquired on the date of entry into force of thisregulation shall not be altered by this regulation.‘

60.

    The ground given for Regulation No 840/95 was that 'following the entry into forceof the Treaty on European Union, the Court of Auditors [became] an institutionof the European Communities and it therefore [seemed] desirable to amend theprovisions of Regulation ... No 2290/77 with regard to the salaries and transitionaltermination-of-service allowances‘ (second recital in the preamble to RegulationNo 840/95).

61.

    By contrast, Regulation No 840/95 does not contain any recital in its preambleexpressly and specifically referring to the failure to increase the rates of acquiredpensions.

62.

    According to the defendant and the intervener, the second recital in the preambleto Regulation No 840/95 nevertheless constitutes implied reasoning. The reasongiven for increasing the basic monthly salary and the transitional allowance explains,by implication but adequately, the failure to increase the rates of acquired pensions.

The reason for both those measures was that the Court of Auditors had becomea Community institution. That circumstance upgrades in a certain way the functionof members of the Court of Auditors. Conversely, duties performed before thencannot be upgraded in that way. They conclude that, as the pensions constituteremuneration for duties performed under the former system, they cannot beincreased.

63.

    Although that reasoning is implied, it is reasonably sufficient to explain the failureto increase pensions acquired up until the date on which the Court of Auditorsbecame a Community institution, namely 1 November 1993. Members of the Courtof Auditors who ceased to hold office before the Treaty on European Unionentered into force cannot be considered to have performed their duties for theCourt of Auditors as a Community institution.

64.

    On the other hand, the decision in Article 2 of Regulation No 840/95 not toincrease the rates of acquired pensions takes effect not from the date on which theTreaty on European Union entered into force, namely 1 November 1993, but onthe date when that regulation was first applied, namely 1 May 1995. Since, asstated in paragraph 31 above, entitlement to a pension is acquired on the day whenthe person concerned ceases to hold office, it follows that members of the Courtof Auditors who, like the applicant, held office after 1 November 1993, but ceasedto do so, and therefore acquired their entitlement to a pension, before 1 May 1995,are refused an increase in their pension. The reason for the failure to increasepensions, contained in the second recital in the preamble to Regulation No 840/95,namely that the Court of Auditors had become a Community institution, is notapplicable to them because they held office after it had acquired that status. Thatreason is particularly inapplicable to them because the grant of pension entitlementis determined by reference to their departure from office. Changes ofcircumstance, such as the change relied on in the preamble to RegulationNo 840/95, must therefore be assessed as at that date.

65.

    The regulation thus contains no reasons explaining the failure to increase the rateof pensions acquired between the date on which the Court of Auditors became aCommunity institution, namely 1 November 1993, and the date on which theregulation was first applied, namely 1 May 1995. It therefore fails, in breach ofArticle 18 of Regulation No 2290/77, to provide reasons as to why it would beappropriate for members of the Court of Auditors who ceased to hold officebetween those two dates not to benefit from an increase in the rate of theirpension from the date when Regulation No 840/95 entered into force and the basicsalary of members holding office increased.

66.

    At the hearing, the intervener asserted that the refusal to grant a member such asthe applicant an increase in the rate of his pension was justified by the fact that thefunctions of the Court of Auditors had increased on its becoming a Communityinstitution; in particular, it had the function, laid down by the new secondsubparagraph of Article 188c(1) of the EC Treaty, of providing the EuropeanParliament and the Council with a statement of assurance as to the reliability of theaccounts and the legality and regularity of the underlying transactions. New tasksand responsibilities were thus assigned to its members. Those new functions werenot performed in full until a complete financial year had elapsed and thecorresponding first statement of assurance had been drawn up. A member who,like the applicant, left office in February 1994 would not therefore have actuallybeen involved in the performance of the new functions. The refusal to give him thebenefit of the increase in basic salary granted to members because the Court ofAuditors had become an institution was therefore objectively justified.

67.

    The Court considers, however, that that line of argument — which, moreover, wasput forward for the first time at the hearing in reply to a question from the Courtand is disputed by the applicant — is invalid in two respects. First, by requiring the

Council to adopt, at the same time as a decision increasing the basic salary, adecision making an appropriate increase in the rates of acquired pensions,Article 18 of Regulation No 2290/77 necessarily requires the Council to considerwhether the increase in the rates of acquired pensions is appropriate and,therefore, the reason why an increase in that amount is appropriate, before thatdecision. In this case, the reason put forward by the Council at the hearing derivesneither from the preamble to Regulation No 840/95 nor from any other documentsubmitted to the Court, so that it has not been established that it actually guidedthe Council in its decision not to increase pensions acquired between 1 November1993 and 1 May 1995. Secondly, the reason put forward does not explain why thedecision to increase the rates of acquired pensions takes effect on 1 May 1995 andnot, as that reasoning would dictate, either at the end of the Court of Auditors' firstfinancial year after becoming a Community institution, that is to say on31 December 1994, or on the date of the first statement of assurance, relating tothe 1994 financial year, which, according to the explanation given by thedefendant's representative at the hearing, was provided in November 1995. Furthermore, the amount of the pension is calculated on the basis not only ofcompleted full years in office but also, in accordance with the first paragraph ofArticle 10 of Regulation No 2290/77, of each additional month completed after thelast full year in office.

68.

    The first limb of the second plea, alleging that Article 18 of Regulation No 2290/77was infringed by Article 2 of Regulation No 840/95, is therefore well founded.

69.

    Notwithstanding that conclusion, it is desirable also to examine the second limb ofthe second plea, alleging that the principle of non-discrimination was infringed.

The second limb, alleging infringement of the principle of non-discrimination

—    Arguments of the parties

70.

    The applicant states that the date on which Regulation No 840/95 took effect,namely 1 May 1995, is pivotal, in that pensions acquired after that date, unlikepensions acquired before that date, benefit from an increase. That difference intreatment is not based on any objective criterion. The ground put forward by theCouncil to justify that distinction, namely the fact that the Court of Auditors hadbecome an institution of the European Communities, is not an objective criterionrelated to an increase in basic salaries and monthly transitional allowances. Furthermore, Article 18 of Regulation No 2290/77 applies irrespective of thereason for the increase in question.

71.

    The applicant raises the question why that increase covers, apart from basicsalaries, monthly transitional allowances being paid at the date on which RegulationNo 840/95 was first applied, namely 1 May 1995, but does not cover pensions. Thatdistinction is striking in his case. Having left the Court of Auditors in February

1994, that is to say two months after it had become an institution of the EuropeanCommunities, he was nevertheless entitled, once Regulation No 840/95 was applied,to the increase in the monthly transitional allowance which he had been paid fromMarch 1994. By contrast, his pension could not be increased since it was set on thebasis of the last basic salary which he had received before Regulation No 840/95was applied. The applicant concludes that there is no link between the Court ofAuditors' attainment of the status of Community institution and the determinationof salaries, transitional allowances and pensions.

72.

    The applicant takes the view that the same must hold for pensions as holds fortransitional allowances, which were increased following the entry into force ofRegulation No 840/95. By treating the determination of transitional allowances andthat of pensions differently without a valid objective reason, Regulation No 840/95is arbitrarily discriminatory, with the result that Article 2 is unlawful andunenforceable against him.

73.

    The applicant claims that the system set up by Article 2 of Regulation No 840/95also creates an unjustifiable and unfair difference of treatment, first, with regardto the President and members of the Court of Auditors who are not yet entitled toa pension and, secondly, between those entitled to a pension themselves dependingon the date which is taken into account to determine when their pension isacquired.

74.

    He considers that the judgment in Case 28/74 Gillet v Commission [1975] ECR 463,relied on by the defendant, is not relevant here. That case was concerned with thealteration of a situation in the future and the ensuing financial consequences. Regulation No 840/95, on the other hand, introduces different levels of pension foridentical services already performed by the President or members of the Court ofAuditors in the past. In point of fact, its effect is to lay down different rates ofpension for the period from October 1977, when the Court of Auditors was set up,to May 1995. Thus, a member of the Court of Auditors who held office fromOctober 1977 until he acquired a pension in April 1995 receives a lower pensionthan a colleague who was appointed at the same time, in October 1977, butacquired his pension a week later, in the course of May 1995. The applicantreiterates that he was appointed to the Court of Auditors on 18 May 1986 and thathe ceased to hold office on 9 February 1994, when the Court of Auditors had justgained the status of Community institution.

75.

    The applicant further points out that when the Council adopted Regulation No840/95, it departed from its customary practice designed to give the increase in therates of pensions the same retrospective effect as that given to pay. If the rationalefor that legislation were, as the Council claims, that the Court of Auditors hadbecome an institution, the adjustment of salaries should have been backdated toDecember 1993, when he was still in office. Accordingly, the date of 1 May 1995

is not based on any valid objective criterion for determining which persons areentitled to an increase in the rate of their pension.

76.

    Furthermore, according to the applicant, the Council may not, contrary to theassertion of the Court of Auditors, consider the increase in salaries 'on a case bycase basis‘. On the contrary, Article 18 of Regulation No 2290/77 requires asimultaneous decision on the appropriate increase in the rates of pensions inrelation to the increase in salaries. 'Appropriate decision‘ is not to be understoodas meaning a decision taken 'on a case by case basis‘ but as a decision justified inrelation to the increase in salaries.

77.

    The defendant refers to the judgment in Gillet, cited in paragraph 74 above, whereit was held, in relation to a regulation repealing from a given moment a measurebenefiting officials, that there was no unequal treatment of officials to whom thatmeasure could still apply vis-à-vis those to whom it could no longer apply. It citesin that regard the Opinion of Advocate General Mayras in Gillet, where he stated,at p. 476, that no rule of law higher than the Staff Regulations required theCommunity legislature to obtain the same advantages for officials appointed orpromoted after the date on which the regulation repealing previous legislation hadtaken effect, and concluded that if those servants were thus treated differently therewas no unlawful discrimination.

78.

    The defendant deduces therefrom that the date on which new legislation enters intoforce constitutes an objective distinguishing criterion for ascertaining the personsto whom it applies. That criterion is considered in the case-law of the Court ofJustice to comply with the principle of equal treatment and non-discrimination. The judgment recalls the principle under which difference of treatment arising fromthe entry into force of a new provision on a particular date cannot amount tounlawful discrimination. Its entry into force is an objective factor, applicable toeverybody alike. That conclusion must therefore also apply in the instant case toRegulation No 840/95 which, from 1 May 1995, freezes the pensions of formermembers of the Court of Auditors at a given level, calculated on the basis of anamount corresponding to 104% of the salary of an official in the last step ofGrade A 1, while the remuneration of current or future members corresponds to108% of the salary of such an official.

79.

    In the defendant's view, the opposite solution would render completely meaninglessthe principle under which the Community authority, in this case the Council, isentitled at any time to make such amendments to the Staff Regulations as itconsiders to be consistent with the interests of the service.

80.

    The defendant states that the difference of treatment relied on by the applicant,between the solution adopted for the transitional allowance and that applied topensions, is justified in the light of the principle that a derogation must beinterpreted strictly. Applying that principle, only pensions should be covered by thespecific derogation laid down by Article 2 of Regulation No 840/95, while the

transitional allowance, in the absence of a specific derogation, would be coveredby the general system embodied in Article 1. In addition, if the Court were to takethe view that the transitional allowance was increased unlawfully, that could not inany event constitute grounds for an increase in pensions as well.

81.

    The defendant considers that the applicant's argument that Article 2 of RegulationNo 840/95 discriminates between former members entitled to a pension should alsobe rejected. They could all be guaranteed the same pension only if Article 18 ofRegulation No 2290/77 automatically imposed the same increase for everybody. However, Article 18 provides that the increase is to be examined case by case andin any event is not automatic. The defendant deduces that all the applicant can dois to plead that Article 18 is unlawful, although he does not do so in his application.

82.

    The defendant concedes that it is, in accordance with the example cited by theapplicant in his reply, theoretically correct that two former members may receivedifferent pensions because one acquired his pension shortly before, and the othershortly after, the new provision entered into force. However, that argument is notrelevant. First, the adoption of a general and abstract rule is not discriminatorysimply because, in certain borderline cases, some persons to whom it applies maybe subject to the drawbacks arising from it (Case 147/79 Hochstrass v Court ofJustice [1980] ECR 3005, paragraph 14). In the instant case, therefore, the examplecited by the applicant, which, moreover, does not correspond to his own situation,cannot call into question the validity of the general and abstract measure. Secondly, a difference of treatment does not necessarily entail unequal treatmentor discrimination. In this case, therefore, there is an objective, neutral and abstractdistinction, based on the date when the new regulation entered into force.

83.

    The defendant also explains what it means by increasing the rates of pensions ona case by case basis. Article 18 of Regulation No 2290/77 requires the Council totake a specific decision on an appropriate increase in the rates of pensionswhenever it decides on an increase in the basic salary, that is to say whenever thatcase arises. That assessment is therefore carried out 'on a case by case basis‘because the increase in the rates of pensions can be 'appropriate‘ only if itspecifically relates to the increase made to salaries. Furthermore, it is clear thatArticle 18 requires an increase in the rates of pensions to be specifically consideredif salaries are increased. The increase in the rates of pensions cannot be automatic,as otherwise Article 18 would serve no purpose.

84.

    The defendant concludes that the alleged discrimination between former membersentitled to a pension stems from Article 18 of Regulation No 2290/77, and not fromArticle 2 of Regulation No 840/95 which merely implements that provision. Itdeduces that the applicant may therefore plead only that Article 18 of RegulationNo 2290/77 is unlawful, although he does not do so. This branch of the plea shouldtherefore be rejected.

85.

    The intervener adopts the view expressed by the Court of Auditors that, as thelatter had become a Community institution, it was appropriate to increase thesalaries of its members, and states that it merely exercised its discretion. It was notrequired to adopt the measure. Neither the Treaty nor any other provision obligedit to decide on those increases. Since it was under no obligation, it did notunlawfully fail to act, the only ground which could possibly have justified, in orderto make good that failure to act, the increase in salaries taking effectretrospectively from the date on which the Treaty on European Union entered intoforce. In any event, any retrospective effect should normally remain the exception. The date on which Regulation No 840/95 began to be applied is objective, neutraland abstract. It does not give rise to discrimination.

86.

    The intervener concludes that the limb of the plea alleging that the principle ofnon-discrimination was infringed must be rejected as unfounded.

—    Findings of the Court

87.

    According to settled case-law (see, for example, Case T-109/92 Lacruz Bassols vCourt of Justice [1994] ECR-SC II-105, paragraph 87, and Case T-142/95 Delvauxv Commission [1997] ECR-SC II-1247, paragraph 95), the principle of equality andnon-discrimination requires that comparable situations should not be treateddifferently, unless different treatment is objectively justified.

88.

    In this case, Regulation No 840/95 introduces a difference in the pensionarrangements for former members of the Court of Auditors depending on whetherthey ceased to hold office, and therefore acquired their pension entitlement, beforeor after that regulation was first applied on 1 May 1995. The difference lies in thefact that the pension of members who ceased to hold office before 1 May 1995 iscalculated by reference to a basic salary of 104% of the salary of an official in thelast step of Grade A 1, whereas the pension of members who ceased to hold officeafter 1 May 1995 is calculated by reference to a basic salary of 108% of the salaryof such an official.

89.

    Regulation No 840/95 gives no express justification for that difference of treatment. That regulation was adopted in order to take account of the fact that the Court ofAuditors became a Community institution when the Treaty on European Unionentered into force on 1 November 1993. That statement of reasons is thus capableof justifying a difference of treatment between members who ceased to hold officebefore and after that date. On the other hand, it cannot justify a difference oftreatment between members all of whom ceased to hold office after that date andtherefore performed their duties after the Court of Auditors had become aCommunity institution. Those members are, in the light of that statement, in acomparable position, but are treated differently. The statement of reasonstherefore does not explain why it was appropriate to accord different treatment tomembers all of whom ceased to hold office after the Treaty on European Union

had entered into force on 1 November 1993, depending on whether they did sobefore or after 1 May 1995, the date on which Regulation No 840/95 was firstapplied. Neither the defendant nor the intervener adduced evidence in the courseof the written procedure which is capable of showing that that difference in thetreatment of persons who were nevertheless in a comparable position wasobjectively justified.

90.

    The argument put forward by the intervener at the hearing relating to the fact thatthe new functions conferred on the Court of Auditors by the Treaty on EuropeanUnion could not have been performed in full until a complete financial year hadended, when the first statement of assurance was presented (paragraph 66 above),is also intended to demonstrate that the applicant is in a different position,justifying a difference of treatment, from members who ceased to hold office afterRegulation No 840/95 had entered into force. The Court draws attention to itsfindings in paragraph 67 above and adds that the date from which the differentarrangements at issue were introduced, namely 1 May 1995, is both subsequent tothe end of the first financial year following the Court of Auditors' becoming aninstitution, namely 31 December 1994, and prior to the drawing up of the firststatement of assurance, relating to the 1994 financial year, which, according to theexplanation given by the defendant's representative at the hearing, was providedin November 1995. In the light of those contradictions, the date of 1 May 1995does not appear to have been a deliberate choice prompted by the considerationsput forward or to reflect those considerations.

91.

    Nor can the considerations put forward by the intervener at the hearing objectivelyjustify a difference of treatment. Their starting point is a comparison of theposition of members of the Court of Auditors in the light of its becoming aninstitution. That comparison does not merely link the two objective terms, namelythe date on which the Court of Auditors became an institution and the date onwhich a member ceased to hold office. It additionally takes account of a thirdfactor, namely how long the member held office after the Court of Auditorsbecame an institution. That factor thus brings an assessment of length of serviceinto the comparison.

92.

    Following that particular line of approach, account ought also to have been takenof the fact that the pension constitutes consideration for all the duties performedby the member for the body, and then the institution, which he served. The firstparagraph of Article 10 of Regulation No 2290/77 provides, in that regard, that theamount of the pension is to be determined by reference to the entire period duringwhich the member held office, including not only full years in office but also eachadditional month completed after the last full year. Furthermore, in accordancewith the first subparagraph of Article 206(4) of the EC Treaty, which, pursuant toArticle G(59) of the Treaty on European Union, has now become the firstsubparagraph of Article 188b(3) of the EC Treaty, members of the Court ofAuditors are appointed for a term of six years, which may be renewed. It follows,

therefore, that, in the absence of special circumstances, a member who ceased tohold office shortly after the date on which Regulation No 840/95 was first applied,namely 1 May 1995, acted almost entirely before the Court of Auditors became aninstitution on 1 November 1993. By contrast, only a small fraction of his period inoffice was served after that event. His position is thus, in that regard, notsignificantly different from that of the applicant.

93.

    The circumstances relied on by the intervener at the hearing, therefore, do notconstitute an objective justification for the difference of treatment, with regard toan increase in the rate of pension justified by the Court of Auditors' becoming aninstitution, between members all of whom continued to hold office after it hadbecome an institution, depending on whether they ceased to hold office before, orafter, 1 May 1995.

94.

    The defendant and the intervener also contend in essence that it is well establishedthat different treatment resulting from the entry into force of a new provision ona specific date cannot amount to unlawful discrimination. The provision's entryinto force is an objective factor, applicable to everybody alike. The oppositesolution would render meaningless the principle under which the Communityauthority is entitled at any time to make such amendments as it considers to beconsistent with the interests of the service.

95.

    However, in the first place, that argument fails to take into account that it isconceivable for the date on which new legislation becomes applicable to constituteunlawful discrimination (see, for example, in relation to the discriminatory natureof the date of entry into force of new internal directives, Case T-92/96 Monaco vParliament [1997] ECR-SC II-573, paragraphs 50 to 58).

96.

    Secondly, the defendant cannot rely, in support of its contention, on the judgmentsin Gillet and Hochstrass, cited above.

97.

    The question raised in Gillet related to a regulation adopted in 1972 whichestablished, in relation to measures terminating service, different systems ofpayment for officials in Grade A 1 or A 2 who were recruited under the formerStaff Regulations of the European Coal and Steel Community of 1956 andterminated their service under the same conditions, according to whether or notthey held one of those two grades when the new Staff Regulations of Officials ofthe European Coal and Steel Community entered into force on 1 January 1962. The applicant, an official who did not fall within that category until after1 January 1962, claimed, in connection with a plea of illegality, that that regulationwas discriminatory. The Court of Justice dismissed that plea.

98.

    It is admittedly implicit in that judgment that the Community legislature is entitledto adopt, for the future, staff regulations which are less favourable for officials. However, in that judgment the Court stated that the validity of transitionalmeasures safeguarding the rights lawfully acquired by officials recruited under

former, more favourable, staff regulations could not be called into question, andconcluded that those transitional measures did not discriminate against an officialrecruited under the new, less favourable, staff regulations. The Court took care inits review of the disputed measures to check that the difference of treatmentbetween, on the one hand, an official recruited under the former, more favourable,staff regulations who continues, after the new, less favourable, regulations areadopted, to benefit from transitional arrangements safeguarding his rights and, onthe other hand, an official recruited under the new, less favourable, staffregulations, was objectively justified. The Court held in that regard, first, that theofficial recruited under the new staff regulations could not rely on the former, morefavourable, regulations and, secondly, that the transitional arrangements benefitingofficials recruited under the former, more favourable, staff regulations could notbe called into question.

99.

    The Court also checked that the reference date distinguishing between the twocategories, namely 1 January 1962, was objectively justified.

100.

    It cannot therefore be inferred from that judgment that the date on which newlegislation enters into force can never be discriminatory.

101.

    The second judgment relied on by the defendant, that in Hochstrass, cited atparagraph 82 above, admittedly states that 'although in borderline cases fortuitousproblems must arise from the introduction of any general ... system of rules, thereare no grounds for taking exception to the fact that the legislature has resorted tocategorisation‘ alleged to be discriminatory (paragraph 14). However, the Courtimmediately goes on to add that that conclusion applies only if the categorisation'is not in essence discriminatory having regard to the objective which it pursues‘.

102.

    Moreover, care is taken in the judgment to verify that the categorisation under thenew legislation (in that case, the introduction of an expatriation allowance grantedon the basis of the criterion of nationality) is objectively justified.

103.

    That judgment therefore cannot do away with the need to check, in reviewingcompliance with the principle of non-discrimination, that the differences inarrangements introduced by new rules are objectively justified.

104.

    The Court observes, finally, that it is true that the Community legislature is free tomake at any time such amendments to staff regulations, in this case RegulationNo 2290/77, as it considers to be consistent with the interests of the service. Thefact remains, however, that where that amendment is specifically justified byreference to a new situation, in this case the attainment by the Court of Auditorsof the status of Community institution, and concerns a specified category ofpersons, in this case members who held office after the Court of Auditors hadbecome an institution, it must treat in the same way those persons falling within thecategory which is specifically concerned by that new situation.

105.

    In the instant case the Community legislature was not necessarily obliged toincrease the basic salary, and therefore the pensions, of members of the Court ofAuditors. However, if it makes such an increase, on the ground that the Court ofAuditors has become an institution, and if it proposes not to give the benefit of thatincrease to persons entitled to pensions acquired before the entry into force of theregulation adopted for that purpose, it is required to ensure that, from the entryinto force of that regulation, all the members who are in the situation whichbrought about that increase, namely those who have held office after the Court ofAuditors became an institution, are treated in the same way. It has beenestablished above that those requirements were not complied with in this case.

106.

    Finally, the discrimination found to exist does not arise, as the defendant maintains,from the application of Article 18 of Regulation No 2290/77. That provision, whichobliges the Council, in the event of an increase in the basic salary of the membersof the Court of Auditors, to adopt at the same time a decision on an appropriateincrease in the rates of acquired pensions, in no way prevents the Council fromcomplying with the principle of equal treatment. On the contrary, that article, byusing the adjective 'appropriate‘, obliges the Council also to consider whether thathigher rule of law is complied with.

107.

    It follows that, in this instance, the Council has infringed the principle of equaltreatment.

108.

    Since the second limb of the present plea, alleging infringement of the principle ofequal treatment, is also well founded, there is no need to deal with the applicant'sarguments relating to the fact that Regulation No 840/95 increased the transitionalallowance without increasing pensions acquired on the date of its entry into force.

109.

    The action is therefore well founded without it being necessary to analyse the thirdlimb of the present plea, alleging infringement of the principle of the protection oflegitimate expectations.

110.

    The contested decision adopted by the defendant, which is founded on Article 2 ofRegulation No 840/95, must therefore be annulled.

Costs

111.

    Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs if they have been applied for in the successful party'spleadings. Since the Court of Auditors has been unsuccessful and costs wereapplied for, it must be ordered to pay the costs.

112.

    Under the first subparagraph of Article 87(4) of the Rules of Procedure,institutions which have intervened are to bear their own costs.

On those grounds,

THE COURT OF FIRST INSTANCE (Fifth Chamber),

hereby:

1.

    Annuls the decision of the Court of Auditors of 20 February 1997 settingthe rate of the applicant's pension;

2.

    Orders the Court of Auditors to pay the costs;

3.

    Orders the Council to bear its own costs.

AziziGarcía-Valdecasas Jaeger

Delivered in open court in Luxembourg on 30 September 1998.

H. Jung

J. Azizi

Registrar

President

1: Language of the case: French.

ECR