CELEX: 61980CJ0167(01)
Former official
Rates of exchange for calculation of pension

1 BY AN APPLICATION LODGED AT THE COURT REGISTRY ON 18 JULY 1980 THE APPLICANT , A RETIRED OFFICIAL OF THE EUROPEAN PARLIAMENT , BROUGHT AN ACTION UNDER ARTICLE 91 OF THE STAFF REGULATIONS OF OFFICIALS FOR THE ANNULMENT OF THE COMMISSION ' S DECISION REDUCING AS FROM OCTOBER 1979 THE MONTHLY PENSION PAYABLE TO HIM AND OF THE REJECTION OF THE COMPLAINT WHICH HE SUBMITTED AGAINST THAT DECISION .
2 IN SUPPORT OF HIS ACTION THE APPLICANT CLAIMS THAT THE COUNCIL REGULATION ( EURATOM , ECSC , EEC ) NO 3085/78 OF 21 DECEMBER 1978 ( OFFICIAL JOURNAL 1978 L 369 , P . 6 ), WHICH AMENDED THE PROVISIONS OF THE STAFF REGULATIONS WITH REFERENCE TO THE MONETARY PARITIES TO BE USED , AND COUNCIL REGULATION ( EURATOM , ECSC , EEC ) NO 3086/78 OF THE SAME DATE ADJUSTING THE WEIGHTINGS APPLICABLE TO THE REMUNERATION AND PENSIONS OF OFFICIALS AND OTHER SERVANTS OF THE EUROPEAN COMMUNITIES FOLLOWING THE AMENDMENT OF THE PROVISIONS OF THE STAFF REGULATIONS CONCERNING THE MONETARY PARITIES TO BE USED IN IMPLEMENTING THE STAFF REGULATIONS ( OFFICIAL JOURNAL 1978 L 369 , P . 8 ) ARE UNLAWFUL .
3 THE APPLICANT IS IN RECEIPT OF A PENSION UNDER ARTICLE 77 OF THE STAFF REGULATIONS . BY VIRTUE OF THE THIRD PARAGRAPH OF ARTICLE 45 OF ANNEX VIII TO THE STAFF REGULATIONS , HE COULD ELECT TO HAVE HIS PENSION PAID IN THE CURRENCY EITHER OF HIS COUNTRY OF ORIGIN OR OF HIS COUNTRY OF RESIDENCE OR OF THE COUNTRY WHERE THE INSTITUTION TO WHICH HE BELONGED BEFORE HIS RETIREMENT HAD ITS SEAT . THE APPLICANT , WHO TOOK UP RESIDENCE IN HIS COUNTRY OF ORIGIN , NAMELY THE UNITED KINGDOM , OPTED TO HAVE HIS BENEFITS PAID IN THE CURRENCY     OF THE COUNTRY WHERE THE PARLIAMENT HAD ITS PROVISIONAL SEAT , THAT IS TO SAY IN LUXEMBOURG FRANCS .
4 UNDER ARTICLE 82 ( 1 ) OF THE STAFF REGULATIONS PENSIONS ARE TO BE WEIGHTED IN MANNER PROVIDED FOR IN ARTICLES 64 AND 65 ( 2 ) OF THE STAFF REGULATIONS FOR THE COUNTRY OF THE COMMUNITIES WHERE THE PERSON ENTITLED TO THE PENSION DECLARES HIS HOME TO BE . PAYMENT OF SUCH PENSIONS IS TO BE EFFECTED IN ACCORDANCE WITH THE TERMS CONTAINED IN ARTICLE 63 IN RESPECT OF PAYMENT OF REMUNERATION .
5 IN THE FORM WHICH THEY TOOK UNTIL THE END OF 1978 , ARTICLES 63 AND 64 OF THE STAFF REGULATIONS PROVIDED AS FOLLOWS :
ARTICLE 63 : ' ' AN OFFICIAL ' S REMUNERATION SHALL BE EXPRESSED IN BELGIAN FRANCS .
IT SHALL BE PAID IN THE CURRENCY OF THE COUNTRY IN WHICH THE OFFICIAL PERFORMS HIS DUTIES .
REMUNERATION PAID IN A CURRENCY OTHER THAN BELGIAN FRANCS SHALL BE CALCULATED ON THE BASIS OF THE PAR VALUES ACCEPTED BY THE INTERNATIONAL MONETARY FUND , AND IN FORCE ON 1 JANUARY 1965 . ' '
ARTICLE 64 : ' ' AN OFFICIAL ' S REMUNERATION EXPRESSED IN BELGIAN FRANCS SHALL . . . BE WEIGHTED AT A RATE ABOVE , BELOW OR EQUAL TO 100% , DEPENDING ON LIVING CONDITIONS IN THE VARIOUS PLACES OF EMPLOYMENT .
. . . THE WEIGHTING APPLICABLE TO THE REMUNERATION OF OFFICIALS EMPLOYED AT THE PROVISIONAL SEATS OF THE COMMUNITIES SHALL BE EQUAL TO 100% AS AT 1 JANUARY 1962 . ' '
6 SINCE 1971 THE CURRENCIES OF CERTAIN MEMBER STATES , INCLUDING THE POUND STERLING , HAVE SUFFERED INCREASINGLY LARGE REDUCTIONS IN VALUE IN RELATION TO THEIR VALUES IN 1965 . DURING A FIRST PERIOD EXTENDING UNTIL 1978 THE COUNCIL DID NOT ALTER THE EXCHANGE RATES LAID DOWN BY ARTICLE 63 OF THE STAFF REGULATIONS . HOWEVER , IN ORDER TO MAINTAIN THE PURCHASING POWER OF PENSIONS PAID IN CURRENCIES WHICH HAD FALLEN IN VALUE , IT INCREASED THE WEIGHTINGS REFERRED TO IN ARTICLE 64 OF THE STAFF REGULATIONS FOR THE COUNTRIES CONCERNED .
7 THE RESULT WAS THAT IN THE CASE OF PENSIONERS RESIDING IN THE UNITED KINGDOM WHO HAD OPTED TO HAVE THEIR BENEFITS PAID IN POUNDS STERLING , THE REDUCTION IN THE PURCHASING POWER OF THE AMOUNTS CALCULATED ON THE BASIS OF THE FORMER PARITIES WAS OFFSET BY THE INCREASE IN THE WEIGHTING APPLICABLE TO THE UNITED KINGDOM . THOSE PENSIONERS WHO , LIKE THE APPLICANT , HAD CHOSEN TO HAVE THEIR     BENEFITS PAID IN LUXEMBOURG FRANCS , THE AMOUNT OF WHICH COULD BE CONVERTED INTO POUNDS STERLING AT THE RATE OF EXCHANGE PREVAILING ON THE DAY , AND WHO THEREFORE DID NOT INCUR A SIMILAR RISK OF SUSTAINING A REDUCTION IN PURCHASING POWER , NEVERTHELESS HAD THEIR PENSIONS ADJUSTED BY THE SAME INCREASE IN THE WEIGHTING , SINCE THE WEIGHTING WAS OF GENERAL APPLICATION .
8 THUS , BETWEEN 1973 , THE DATE OF THE UNITED KINGDOM ' S ACCESSION TO THE COMMUNITIES , AND 1978 , THE AMOUNTS ACTUALLY PAID TO PENSIONERS WHO RESIDED IN THE UNITED KINGDOM BUT HAD CHOSEN TO HAVE THEIR BENEFITS PAID IN LUXEMBOURG FRANCS ROSE PROGRESSIVELY OWING TO THE MERE FACT THAT THEY WERE ADJUSTED BY THE INCREASED WEIGHTING AND WERE ULTIMATELY MUCH HIGHER THAN THOSE PAID TO PENSIONERS WHO RESIDED IN THE UNITED KINGDOM AND HAD OPTED FOR PAYMENT IN POUNDS STERLING .
9 REGULATION NO 3085/78 PUT AN END TO THAT SYSTEM BY REPLACING THE FORMER PARITIES BY THE APPLICATION OF UPDATED RATES OF EXCHANGE . AT THE SAME TIME REGULATION NO 3086/78 RESTORED THE WEIGHTINGS TO THEIR ORIGINAL FUNCTION OF ALLEVIATING THE EFFECTS OF THE DIFFERENCES IN LIVING CONDITIONS BY COMPARISON WITH THOSE EXISTING IN THE COUNTRIES IN WHICH THE PROVISIONAL SEATS OF THE COMMUNITIES WERE SITUATED . ON THAT OCCASION THE WEIGHTING APPLICABLE TO THE UNITED KINGDOM WAS SUBSTANTIALLY REDUCED .
10 REGULATIONS NOS 3085/78 AND 3086/78 APPLIED FROM 1 APRIL 1979 . HOWEVER , THE THIRD PARAGRAPH OF ARTICLE 4 OF REGULATION NO 3085/78 PROVIDES AS FOLLOWS :
' ' HOWEVER , FOR PENSIONS AND ALLOWANCES OF WHICH THE NET AMOUNT BECOMES LESS THAN THAT UNDER THE EXISTING ARRANGEMENTS , THE REGULATION SHALL ONLY APPLY FROM 1 OCTOBER 1979 . FROM THAT DATE THE DIFFERENCE BETWEEN THE NET AMOUNTS RESULTING FROM THE IMPLEMENTATION OF THIS REGULATION AND THOSE RECEIVED IN SEPTEMBER 1979 SHALL BE REDUCED BY ONE TENTH PER MONTH . ' '
11 ON 22 OCTOBER 1979 THE COMMISSION INFORMED THE APPLICANT THAT THE NEW SYSTEM WOULD BE APPLIED TO HIS PENSION PAYMENTS FROM 1 OCTOBER 1979 . THE NET AMOUNT OF THE BENEFIT , WHICH CAME TO LFR 19 351 IN SEPTEMBER 1979 ,     WOULD BE REDUCED TO LFR 8 398 . HOWEVER , IN ACCORDANCE WITH THE THIRD PARAGRAPH OF ARTICLE 4 OF REGULATION NO 3085/75 CITED ABOVE , THE REDUCTION WOULD BE MADE AT THE RATE OF ONE TENTH PER MONTH FROM OCTOBER 1979 UNTIL JULY 1980 .
12 SINCE HIS COMPLAINT AGAINST THAT DECISION , WHICH WAS LODGED ON 8 JANUARY 1980 , EVOKED NO RESPONSE WITHIN THE PERIOD OF FOUR MONTHS LAID DOWN BY THE STAFF REGULATIONS , THE APPLICANT BROUGHT THIS ACTION .
13 THE APPLICANT FIRST SUBMITS IN SUPPORT OF HIS APPLICATION THE FOLLOWING ARGUMENTS BASED ON INFRINGEMENT OF ESSENTIAL PROCEDURAL REQUIREMENTS :
1 . ARTICLE 24 OF THE TREATY OF 8 APRIL 1965 ESTABLISHING A SINGLE COUNCIL AND A SINGLE COMMISSION OF THE EUROPEAN COMMUNITIES SHOWS THAT THE STAFF REGULATIONS OF OFFICIALS OF THE COMMUNITIES COULD BE VALIDLY LAID DOWN ONLY AFTER CONSULTATION WITH THE OTHER INSTITUTIONS CONCERNED . THE EUROPEAN PARLIAMENT AND THE COURT OF JUSTICE WERE CONSULTED ON A PROPOSAL FROM THE COMMISSION WHICH DIFFERED CONSIDERABLY FROM THE TEXTS OF THE REGULATIONS WHICH WERE ADOPTED BY THE COUNCIL AND THEREFORE THERE WAS IN FACT NO TRUE CONSULTATION WITH THE PARLIAMENT ON THE TEXT WHICH WAS ADOPTED BY THE COUNCIL .
2.THE REGULATIONS OFFEND AGAINST ARTICLE 190 OF THE TREATY IN SO FAR AS THEY DO NOT STATE THE REASONS ON WHICH THEY ARE BASED .
14 SIMILAR ARGUMENTS IN RELATION TO REGULATIONS NOS 3085/78 AND 3086/78 WERE CONSIDERED BY THE COURT ( FIRST CHAMBER ) IN A NUMBER OF DISPUTES CONCERNING THE RIGHT OF OFFICIALS TO EFFECT TRANSFERS OF FUNDS UNDER ARTICLE 17 OF ANNEX VII TO THE STAFF REGULATIONS , IN PARTICULAR IN ITS JUDGMENTS OF 4 FEBRUARY 1982 IN CASE 828/79 ADAM (( 1982 ) ECR 269 ) AND CASE 1253/79 BATTAGLIA (( 1982 ) ECR 297 ). FOR THE REASONS SET OUT IN THOSE JUDGMENTS THE APPLICANT ' S SUBMISSIONS ARE UNFOUNDED .
15 AS FAR AS THE EFFECTS OF THE REGULATIONS ARE CONCERNED THE APPLICANT ARGUES THAT THE DECISION CHALLENGED AND THE REGULATIONS IN QUESTION WHICH IT IMPLEMENTS IN HIS CASE COULD NOT DEPRIVE HIM OF HIS ESTABLISHED ENTITLEMENT TO A PENSION CALCULATED IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE 77 OF THE STAFF REGULATIONS . IT IS A FUNDAMENTAL PRINCIPLE OF LAW THAT LEGISLATION MAY     NOT DEPRIVE INDIVIDUALS OF VESTED RIGHTS . LEGISLATION WHICH OPERATES RETROACTIVELY SO AS TO DEPRIVE PERSONS OF VESTED PENSION RIGHTS IS A BREACH OF THAT GENERAL PRINCIPLE OF LAW AND IS CONTRARY TO THE PRACTICE OF MEMBER STATES IN THE MATTER OF PUBLIC SERVICE PENSION SCHEMES .
16 IT SHOULD BE OBSERVED IN THAT REGARD THAT THE PROVISIONS OF ANNEX VIII TO THE STAFF REGULATIONS DRAW A CLEAR DISTINCTION BETWEEN THE DETERMINATION OF ' ' PENSION RIGHTS ' '  COVERED BY CHAPTER 2 OF THE ANNEX AND THE ' ' PAYMENT OF BENEFITS ' '  GOVERNED BY ARTICLES 45 AND 46 OF THE ANNEX . THE ARGUMENTS PUT FORWARD BY THE APPLICANT ARE BASED ON THE ASSUMPTION THAT HIS ' ' PENSION RIGHTS ' '  WITHIN THE MEANING OF THE STAFF REGULATIONS WERE REDUCED .
17 THE CHANGES WHICH TOOK PLACE IN THE AMOUNTS ACTUALLY PAID TO THE APPLICANT WERE DUE TO THE EFFECT OF THE RATES OF EXCHANGE AND THE WEIGHTINGS . WHILST THE CHANGES AFFECTD THE PAYMENT OF BENEFITS UNDER ARTICLES 45 AND 46 OF ANNEX VIII , THEY DID NOT HAVE THE EFFECT OF ENCROACHING UPON THE APPLICANT ' S PENSION RIGHTS AS DETERMINED IN ACCORDANCE WITH CHAPTER 2 OF ANNEX VIII , WHICH CONTINUE TO SERVE AS THE BASIS FOR THE CALCULATION OF THE BENEFITS ACTUALLY PAID .
18 IT FOLLOWS THAT THIS SUBMISSION IS INAPPOSITE AND THAT IT IS THEREFORE UNNECESSARY CONSIDER IT .
THE SECOND SUBMISSION ( THE LAWFULNESS OF THE WEIGHTINGS )
19 THE APPLICANT SUBMITS NEXT THAT REGULATION NO 3086/78 IS UNLAWFUL INASMUCH AS IT ALTERED THE WEIGHTINGS FOR REASONS OTHER THAN THOSE WHICH MIGHT JUSTIFY SUCH ACTION UNDER THE TERMS OF ARTICLES 64 AND 65 ( 2 ) OF THE STAFF REGULATIONS , SO THAT THE REGULATION IS VITIATED BY A MISUSE OF POWERS .
20 THE PARLIAMENT CONTENDS THAT THE DETERMINATION OF THE WEIGHTING PURSUANT TO REGULATION NO 3086/78 WAS LAWFUL . THE STAFF REGULATIONS ARE DESIGNED TO ENSURE EQUAL TREATMENT FOR ALL OFFICIALS AND SERVANTS OF THE COMMUNITIES INASMUCH AS , IRRESPECTIVE OF GRADE , THEY MUST ALL ENJOY EQUAL PURCHASING POWER REGARDLESS OF NATIONALITY . AS FAR AS PENSIONERS ARE CONCERNED ARTICLE 82     OF THE STAFF REGULATIONS , WHICH DETERMINES THE WEIGHTINGS APPLICABLE ON THE BASIS OF ARTICLES 64 AND 65 , IS INTENDED TO ACHIEVE THAT . THE CONSIDERABLE AND UNFORESEEN DISPARITIES BETWEEN ACTUAL RATES OF EXCHANGE AND THE RATES USED BY THE INTERNATIONAL MONETARY FUND RESPECTIVELY ON 1 JANUARY 1965 LED TO THE INTRODUCTION OF A NEW ELEMENT IN ADDITION TO THE WEIGHTING , WHICH WAS ORIGINALLY DESIGNED MERELY TO COMPENSATE FOR DIFFERENCES IN THE COST OF LIVING AS BETWEEN THE MEMBER STATES ; IN OTHER WORDS , ITS ROLE WAS TO COUNTERACT CURRENCY FLUCTUATIONS WHICH OCCURRED AFTER 1965 . HENCE THE SCHEME WHICH WAS DESIGNED TO GIVE ALL RETIRED OFFICIALS EQUAL PURCHASING POWER IRRESPECTIVE OF THEIR COUNTRY OF RESIDENCE OFTEN PRODUCED QUITE THE OPPOSITE RESULT . A RETIRED OFFICIALS WHO CHOSE TO RESIDE IN A MEMBER STATE WITH A WEAK CURRENCY WAS GIVEN THE CHOICE OF DRAWING HIS PENSION IN THE CURRENCY OF THE COUNTRY IN WHICH THE INSTITUTION TO WHICH HE HAD BELONGED HAD ITS SEAT . HOWEVER , HIS PENSION WAS SUBJECT TO THE WEIGHTING APPLICABLE FOR THE COUNTRY IN WHICH HE HAD CHOSEN TO RESIDE . THE RETIRED OFFICIAL INCURRED NO LOSS AS A RESULT OF APPLYING THE 1965 IMF RATE OF EXCHANGE BECAUSE HE WAS ABLE TO CONVERT HIS PENSION INTO POUNDS AT THE ACTUAL RATE OF EXCHANGE . IN FACT SOME RETIRED OFFICIALS ENJOYED A PRIVILEGE WHICH CREATED DISCRIMINATION AGAINST OTHER RETIRED OFFICIALS ; THIS WAS NOT THE AIM OF THE STAFF REGULATIONS WHEN THEY WERE DRAWN UP . THE DRAFTING OF A SERIES OF AMENDMENTS DESIGNED TO REINSTATE AND MAKE EFFECTIVE THE PURPOSE OF THE STAFF REGULATIONS AND TO CORRECT AN ANOMALY RESULTING FROM CIRCUMSTANCES OUTSIDE THE CONTROL AND EXPECTATION OF THE COMMUNITY AUTHORITIES CANNOT CONSTITUTE A MISUSE OF POWERS .
21 IT SHOULD BE RECALLED THAT ARTICLE 64 OF THE STAFF REGULATIONS PROVIDES THAT THE WEIGHTINGS ARE TO BE DETERMINED ACCORDING TO ' ' LIVING CONDITIONS IN THE VARIOUS PLACES OF EMPLOYMENT ' ' . ARTICLE 65 ( 2 ) OF THE STAFF REGULATIONS PROVIDES THAT IN THE EVENT OF ' ' A SUBSTANTIAL CHANGE IN THE COST OF LIVING ' '  THE COUNCIL MAY ADJUST THE WEIGHTINGS .
22 THE GRADUAL INCREASE IN THE WEIGHTING APPLICABLE TO THE UNITED KINGDOM WHICH OCCURRED DURING THE PERIOD FROM THE TIME OF ACCESSION UNTIL 1979 WAS INTENDED TO ALLOW THE FIXED PAR VALUES ACCEPTED BY THE INTERNATIONAL MONETARY FUND IN 1965 TO BE MAINTAINED WITHOUT PREJUDICE TO THE PURCHASING POWER OF THE BENEFITS PAID TO FORMER COMMUNITY SERVANTS RESIDING IN THE UNITED KINGDOM WHOSE PENSIONS HAD TO BE CONVERTED INTO POUNDS     STERLING IN ACCORDANCE WITH ARTICLE 63 OF THE STAFF REGULATIONS . WHILST THE OBJECTIVE OF NOT PASSING THE EFFECT OF THE MAINTENANCE OF FIXED EXCHANGE RATES IN TIMES OF CURRENCY DISTURBANCES ON TO PENSIONERS RESIDING IN WEAK CURRENCY COUNTRIES IS WHOLLY WITHIN THE SPIRIT OF THE STAFF REGULATIONS , IT DOES NOT NECESSARILY FOLLOW THAT THE PROVISIONS OF THE STAFF REGULATIONS PERMITTED THE USE OF THE WEIGHTINGS AS AN INSTRUMENT OF MONETARY POLICY .
23 THE COURT HAS ALREADY HELD IN ANOTHER CONTEXT IN ITS JUDGMENT OF 24 OCTOBER 1973 IN CASE 9/73 SCHLUTER V HAUPTZOLLAMT LORRACH (( 1973 ) ECR 1135 ) THAT THE COUNCIL MAY BE ENTITLED TO HAVE RECOURSE TO A TEMPORARY EXPEDIENT WHEN CONFRONTED WITH A SITUATION CHARACTERIZED BY THE ABSENCE OF ANY ADEQUATE PROVISION FOR URGENTLY COUNTERACTING THE EFFECTS OF SUDDEN EVENTS WHICH MAY GIVE RISE TO A SERIOUS SITUATION , PARTICULARLY WHERE THE MEASURES TO BE ADOPTED RELATE TO AN AREA INTIMATELY CONNECTED WITH THE MONETARY POLICIES OF MEMBER STATES , THE EFFECTS OF WHICH THEY ARE PARTIALLY TO OFFSET . HOWEVER , THE COURT ADDED THAT SUCH A STATE OF AFFAIRS MAY BE ONLY TEMPORARY , SINCE THE LEGAL BASIS FOR THE MEASURES IN QUESTION MUST EVENTUALLY BE FOUND IN THE APPROPRIATE PROVISIONS OF COMMUNITY LAW .
24 IN THIS CASE THE ALTERATION OF THE EXCHANGE RATES AND THE CORRESPONDING ADJUSTMENT OF THE WEIGHTINGS DID NOT OCCUR UNTIL THE END OF 1978 . THUS THE TEMPORARY MEASURES GOVERNED THE SITUATION OF PENSIONERS RESIDING IN WEAK CURRENCY COUNTRIES FOR A PERIOD OF APPROXIMATELY SEVEN YEARS .
25 HOWEVER , IT MUST BE ACKNOWLEDGED THAT THAT PERIOD WAS CHARACTERIZED BY UNCERTAINTIES AS TO SUBSEQUENT CURRENCY DEVELOPMENTS . IN THOSE CIRCUMSTANCES , THE COUNCIL ' S RELUCTANCE TO ADAPT COMMUNITY PROVISIONS TO THE NEW SITUATION ON THE CURRENCY MARKET COULD BE EXPLAINED BY THE DIFFICULTIES IN LAYING DOWN , NOT ONLY IN THE SPHERE OF THE STAFF REGULATIONS BUT ALSO IN OTHER SPHERES , CRITERIA ENSURING FIRM RATES OF EXCHANGE .
26 IT FOLLOWS FROM THE FOREGOING THAT THE SUBMISSION PUT FORWARD AS TO THE UNLAWFULNESS OF LAYING DOWN THE WEIGHTING APPLICABLE TO THE UNITED KINGDOM IS UNFOUNDED .
THE THIRD SUBMISSION ( LEGITIMATE EXPECTATION )
27 THE APPLICANT CLAIMS FINALLY THAT THE REDUCTIONS IN PENSION BENEFITS PAID , MADE PURSUANT TO REGULATIONS NOS 3085/78 AND 3086/78 , WERE IN BREACH OF CERTAIN GENERAL PRINCIPLES OF LAW UPHELD BY COMMUNITY LAW . HE CLAIMS IN THAT REGARD THAT HE WAS ENTITLED TO EXPECT THE CONTINUED PAYMENT OF THE BENEFITS AWARDED TO HIM , THE LEVEL OF WHICH HAD GUIDED HIM IN CHOOSING HIS MODE OF LIVING DURING HIS YEARS OF RETIREMENT .
28 BY THAT SUBMISSION THE APPLICANT MUST BE SEEN AS CLAIMING THAT THERE HAS BEEN A BREACH OF THE PRINCIPLE OF THE PROTECTION OF THE LEGITIMATE EXPECTATION , TO WHICH COMMUNITY SERVANTS ARE ENTITLED , THAT COMMITMENTS WHICH THE INSTITUTIONS HAVE ENTERED INTO WILL BE MET .
29 AS HAS BEEN EXPLAINED ABOVE , THE NEW SYSTEM WAS INTRODUCED IN ORDER TO RECTIFY A SITUATION WHICH HAD DETERIORATED AS A RESULT OF FLUCTUATIONS IN THE RATES OF EXCHANGE AND THE PROLONGED APPLICATION OF TEMPORARY EXPEDIENTS DESIGNED TO CONTEND WITH THOSE FLUCTUATIONS . AT THE SAME TIME , IT ENABLED THE VARIOUS CATEGORIES OF PENSIONERS RESIDING IN WEAK CURRENCY COUNTRIES TO BE RESTORED TO A SITUATION IN WHICH THEY WOULD BE ASSURED OF EQUAL TREATMENT .
30 SINCE NONE OF THE COMMUNITY INSTITUTIONS HAD COMMITTED THEMSELVES TO MAINTAINING A SITUATION ARISING FROM THE APPLICATION OF THOSE TEMPORARY EXPEDIENTS WHICH FAVOURED A PARTICULAR CATEGORY OF PENSIONERS , THE APPLICANT ' S SUBMISSION MUST BE REJECTED IN SO FAR AS IT RELATES TO THE ACTUAL INTRODUCTION OF THE NEW SYSTEM .
31 WITH REGARD TO THE ARRANGEMENTS FOR ITS INTRODUCTION , IT SHOULD BE RECALLED THAT IT WAS THE COUNCIL ' S RELUCTANCE TO AMEND THE PROVISIONS OF THE STAFF REGULATIONS CONCERNING THE RATES OF EXCHANGE WHICH CAUSED THE PROGRESSIVE INCREASE IN THE BENEFITS DUE TO THE CATEGORY OF PENSIONERS TO WHICH THE APPLICANT BELONGS . THAT INCREASE OCCURRED OVER A PERIOD OF ABOUT SEVEN YEARS AND YET THE COUNCIL DECIDED , BY INCORPORATING THE THIRD PARAGRAPH OF ARTICLE 4 OF REGULATION NO 3085/78 , TO MAKE PENSIONERS BEAR THE LOSS OF THAT INCREASE AFTER A RELATIVELY SHORT TRANSITIONAL PERIOD , A SYSTEM OF MONTHLY REDUCTIONS OVER A PERIOD OF TEN MONTHS BEING APPLIED FROM 1 OCTOBER 1979 , THAT IS TO SAY SIX MONTHS AFTER REGULATIONS NOS 3085/78 AND 3086/78 ENTERED INTO FORCE .
32 IT SHOULD BE EMPHASIZED THAT THE DETERIORATION IN THE SITUATION WHICH OCCURRED BEFORE THE ADOPTION OF REGULATIONS NOS 3085/78 AND 3086/78 WAS NOT IN ANY WAY ATTRIBUTABLE TO THE CONDUCT OF THE PENSIONERS . THE PROLONGED PERIOD OF DETERIORATION WAS DUE TO THE INACTION OF THE COUNCIL , WHICH FAILED TO RECTIFY EXCHANGE RATES WHICH NO LONGER BORE ANY RELATION TO ECONOMIC REALITY .
33 WHILST THERE MAY BE SOME EXPLANATION FOR THE COUNCIL ' S INACTION IT MUST NONE THE LESS NOT BE OVERLOOKED THAT PENSIONERS BENEFITING FROM THAT INACTION WERE ENTITLED TO EXPECT THE COUNCIL TO TAKE ACCOUNT OF THE SITUATION IN WHICH THEY HAD BEEN PLACED BY THE PROLONGED APPLICATION OF THE SYSTEM TEMPORARILY USED . THAT IS PARTICULARLY TRUE IN THE CASE OF PENSIONS , SINCE THEY ARE INTENDED TO ENSURE THAT OFFICIALS WHO HAVE LEFT THE SERVICE OF THE COMMUNITIES ENJOY AN ADEQUATE STANDARD OF LIVING .
34 IT FOLLOWS THAT AFTER FAILING TO ACT FOR A PERIOD EXTENDING OVER A NUMBER OF YEARS , THE COUNCIL COULD NOT , WITHOUT FAILING TO PROTECT PENSIONERS '  LEGITIMATE EXPECTATIONS , LAY DOWN A TRANSITIONAL PERIOD FOR THE PROGRESSIVE REDUCTION OF THE AMOUNTS PAID WHICH LASTED ONLY TEN MONTHS . A PERIOD OF AT LEAST TWICE THAT LENGTH SHOULD HAVE BEEN ENVISAGED FOR THAT PROCESS .
35 THE SUBMISSION PUT FORWARD AS TO THE FAILURE TO PROTECT LEGITIMATE EXPECTATION IS THEREFORE WELL FOUNDED IN SO FAR AS IT RELATES TO THE PERIOD OVER WHICH THE TRANSITIONAL ARRANGEMENTS INTRODUCED BY THE THIRD PARAGRAPH OF ARTICLE 4 OF REGULATION NO 3085/78 EXTENDED .
36 IT FOLLOWS THAT IN THE ABSENCE OF TRANSITIONAL ARRANGEMENTS WHICH WERE LAWFUL , THE COMMISSION WAS NOT ENTITLED TO APPLY REGULATIONS NOS 3085/78 AND 3086/78 TO THE APPLICANT AND THAT CONSEQUENTLY THE CONTESTED DECISION MUST BE ANNULLED .
37 IT IS FOR THE COMPETENT INSTITUTIONS TO ADOPT THE MEASURES NECESSARY TO REMEDY THE UNLAWFULNESS WHICH HAS BEEN ESTABLISHED AND IN PARTICULAR TO INTRODUCE WITH RETROACTIVE EFFECT SUITABLE TRANSITIONAL ARRANGEMENTS .
Decision on costs
COSTS
38 UNDER ARTICLE 69 ( 3 ) OF THE RULES OF PROCEDURE THE COURT MAY ORDER THAT THE PARTIES BEAR THEIR OWN COSTS .
Operative part
ON THOSE GROUNDS ,
THE COURT ( FIRST CHAMBER )
HEREBY :
1 . ANNULS THE COMMISSION ' S DECISION REDUCING THE APPLICANT ' S PENSION PURSUANT TO ARTICLE 4 OF COUNCIL REGULATION ( EURATOM , ECSC , EEC ) NO 3085/78 OF 21 DECEMBER 1978 ( OFFICIAL JOURNAL 1978 L 369 , P . 6 ), WHICH WAS NOTIFIED TO THE APPLICANT BY A MEMORANDUM OF 22 OCTOBER 1979 .
2.ORDERS THE PARTIES TO BEAR THEIR OWN COSTS .