JUDGMENT OF THE GENERAL COURT (First Chamber)

30 June 2021 ([\*](#Footnote*))

(Civil service – ECB staff – Remuneration – Household allowance – Amendment of the scheme applicable – Rejection of the 2019 application – Plea of illegality – Equal treatment – No transitional measures)

In Case T‐746/19,

**GY,** represented by L. Levi and A. Champetier, lawyers,

applicant,

v

**European Central Bank (ECB),** represented by F. von Lindeiner and D. Nessaf, acting as Agents, and by B. Wägenbaur, lawyer,

defendant,

APPLICATION under Article 270 TFEU and Article 50a of the Statute of the Court of Justice of the European Union for annulment of the ECB’s decision of 28 January 2019 not to grant the applicant the household allowance for 2019,

THE GENERAL COURT (First Chamber),

composed of H. Kanninen, President, N. Półtorak (Rapporteur) and O. Porchia, Judges,

Registrar: E. Coulon,

gives the following

**Judgment**

**Background to the dispute**

1        The applicant, GY, entered the service of the European Central Bank (ECB) on 5 January 2009 under a fixed-term contract. Since 1 October 2017, he has been employed by the ECB under a contract for an indefinite period.

2        Under Article 15 of the ECB Conditions of Employment adopted by Decision 1999/330/EC of the ECB of 9 June 1998 on the adoption of the Conditions of Employment for Staff of the ECB, as amended on 31 March 1999 (OJ 1999 L 125, p. 32; ‘the Conditions of Employment’): ‘Members of staff who are heads of household and satisfy the conditions laid down in the Staff Rules shall be paid a household allowance equal to 5% of their basic salary. In respect of this provision, “head of household” means: (i) a married member of staff ... A head of household shall receive the household allowance only when the gross annual income of his/her spouse or recognised partner does not exceed EUR 57,211 ...’.

3        According to Article 3.5.1 of the ECB Staff Rules, in the version in force before 1 January 2019, ‘the provisions of Article 15 of the Conditions of Employment shall be applied as follows: “Gross annual income” means income originating from employment or self-employment, income replacement (e.g. maternity allowance, parental allowance, social security benefits and unemployment allowance, but not payments representing reimbursement of expenses) or pension, before tax and before the deduction of social security contributions’. In accordance with the first sentence of Article 3.5.3 of the Staff Rules, ‘the reference period for determining the gross annual income shall be the current calendar year’ (‘the previous scheme’).

4        Prior to 2018, the income of the applicant’s spouse had always been lower than the threshold set by the Conditions of Employment for entitlement to the household allowance. The applicant accordingly received the household allowance. By contrast, in 2018, the income of the applicant’s spouse exceeded that threshold for the first and only time.

5        On 22 May 2018, the Directorate-General for Human Resources of the ECB informed staff members, via the intranet, of a proposal to amend the rules governing the payment of benefits and allowances. In particular, the communication informed staff members that in future the reference period for determining, at the beginning of each year, whether the spouse’s gross annual income exceeds the threshold would no longer be the current year, but the previous year.

6        On 15 October 2018, the ECB informed staff members of the latest amendments approved by the Executive Board and the date of their entry into force. On 1 January 2019, the decision of the ECB of 25 September 2018 amending the ECB Staff Rules as regards allowances (ECB/2018/NP19) entered into force, amending the wording of Article 3.5.1 of those rules as follows: ‘for the purpose of the income threshold laid down in Article 15 of the Conditions of Employment, “gross annual income ” means income originating, in the calendar year preceding that in respect of which eligibility is assessed, from employment or self-employment, income replacement, e.g. maternity allowance, parental allowance, social security benefits and unemployment allowance, but not payments representing reimbursement of expenses or pension, before tax and before the deduction of social security contributions’ (‘the new scheme’).

7        By an email of 14 January 2019, the administration requested staff members to confirm their personal data in the ECB’s personnel management system and to declare the gross annual income earned by their spouse in 2018.

8        On 27 January 2019, the applicant replied and confirmed that his spouse’s gross annual income for 2018 was above the threshold.

9        On 28 January 2019, the applicant was informed that, under the new scheme, he would not be granted the household allowance for 2019 and that he would have to reimburse retroactively the amount of EUR 4 407.41, corresponding to the undue payment of the household allowance he had been granted for 2018 (‘the contested decision’).

10      On 27 March 2019, the applicant submitted a request for administrative review to the Deputy Director-General of the Directorate-General for Human Resources of the ECB in order to annul the contested decision in so far as he was not granted the household allowance for 2019. On 24 April 2019, the Deputy Director-General of the Directorate-General for Human Resources rejected the applicant’s request for administrative review.

11      On 24 June 2019, the applicant lodged, on the basis of Article 41 of the Conditions of Employment and Article 8.1.2 of the Staff Rules, a grievance against the decision of 24 April 2019 rejecting his request for administrative review.

12      On 26 August 2019, the President of the ECB rejected the applicant’s grievance.

**Procedure and forms of order sought**

13      By application lodged at the Court Registry on 5 November 2019, the applicant brought the present action.

14      By measure of organisation of procedure of 29 January 2021, adopted on the basis of Article 89(3) of the Rules of Procedure, the Court invited the ECB to submit the Conditions of Employment and the Staff Rules in the versions applicable to the present case. The ECB submitted its response within the prescribed period.

15      The applicant claims that the Court should:

–        annul the contested decision in so far as he was not granted the household allowance for 2019;

–        if need be, annul the decisions of 24 April 2019 and 26 August 2019 respectively rejecting the applicant’s request for administrative review and the applicant’s grievance;

–        order the ECB to pay all the costs.

16      The ECB contends that the Court should:

–        dismiss the action;

–        order the applicant to pay the costs.

**Law**

***Subject matter of the action***

17      In the first place, as regards the claim for annulment, the applicant seeks annulment both of the decisions of 24 April 2019 and 26 August 2019 rejecting his request for administrative review and his grievance and of the contested decision, in so far as he was not granted the household allowance for 2019.

18      It should be recalled that a claim for annulment formally directed against the decision rejecting a grievance has the effect of bringing before the Court the act against which the grievance was submitted, where that claim, as such, lacks any independent content (judgment of 24 September 2019, *US* v *ECB*, T‐255/18, not published, EU:T:2019:680, paragraph 39).

19      In the present case, given that the decisions rejecting the applicant’s request for administrative review and the grievance merely confirm the contested decision, the Court finds that the heads of claim seeking annulment of the decision rejecting the request for administrative review and of the decision rejecting the applicant’s grievance lack any independent content and there is therefore no need to rule on them specifically, even though, when assessing the legality of the contested act, it will be necessary to take into consideration the reasons given in those decisions, since those reasons are also deemed to cover the contested decision (judgment of 24 September 2019, *US* v *ECB*, T‐255/18, not published, EU:T:2019:680, paragraph 40).

20      In the second place, as regards the nature of the pleas in law raised by the applicant, it is apparent from the first plea examined below that the applicant, without formally raising a plea of illegality under Article 277 TFEU, claims that the implementation of the new scheme without any transitional measures leads to unequal treatment.

21      In that regard, the Court recalls that the case-law permits the inference that a plea of illegality is raised implicitly in so far as it is quite clear, as in the present case, that the applicant is in fact raising such a plea (judgments of 25 October 2006, *Carius* v *Commission*, T‐173/04, EU:T:2006:333, paragraph 44, and of 18 June 2015, *EG* v *Parliament*, F‐79/14, EU:F:2015:63, paragraph 34).

22      To that effect, the ECB submits in its written pleadings that the applicant, albeit implicitly, raises a plea of illegality in respect of Decision ECB/2018/NP19 of 25 September 2018 amending the ECB Staff Rules as regards allowances, that is, the decision introducing the new scheme.

23      Therefore, given that the claims under the first plea in law relate in fact to the provisions of Article 1(3) of Decision ECB/2018/NP19 of 25 September 2018 amending the ECB Staff Rules in that they amend Article 3.5.1 of those rules so that they provide that, for the purposes of establishing the income threshold laid down in Article 15 of the Conditions of Employment, ‘gross annual income’ means the spouse’s income during the calendar year preceding that in respect of which eligibility is assessed, in so far as the implementation of that decision without any transitional measures leads to unequal treatment, it must be held, as the ECB moreover acknowledged in its written pleadings, that those provisions are the subject of an implicit plea of illegality.

24      In that regard, the general act claimed to be illegal is applicable to the present case and there is a direct legal connection between the contested decision and the general act in question (see judgment of 27 October 2016, *ECB* v *Cerafogli*, T‐787/14 P, EU:T:2016:633, paragraph 44). The claim under that plea of illegality will be examined in the context of the first plea in law, by which the applicant alleges infringement of the principle of equal treatment stemming from the lack of transitional measures when the new scheme was introduced, in support of the claim for annulment of the contested decision in so far as he was not granted the household allowance for 2019 (see, to that effect, judgments of 15 September 2016, *Yanukovych* v *Council*, T‐346/14, EU:T:2016:497, paragraph 59, and of 15 September 2016, *Yanukovych* v *Council*, T‐348/14, EU:T:2016:508, paragraph 60).

***Substance***

25      In support of his claim for annulment, the applicant puts forward four pleas in law alleging, first, infringement of the principle of non-discrimination, second, infringement of the principle of acquired rights, third, infringement of the principle of effectiveness and of Article 15 of the Conditions of Employment, and, fourth, breach of the duty to have regard for the welfare of officials.

26      Under the first plea, the applicant complains that his situation, although different from that of other staff, was not taken into account when the new scheme was applied. He argues, first, that his situation was different in that, although in 2018 his spouse’s income exceeded the threshold set by the new scheme, that income did not exceed that threshold in 2019, yet he did not receive a household allowance for that year because his spouse’s income had exceeded the threshold in the preceding year. In that sense, he was treated in the same way as a staff member whose spouse’s income had exceeded the threshold for each of those two years. Secondly, the applicant observes that a member of staff whose spouse’s income did not exceed the threshold for 2018 would also receive the household allowance in the following year even if his or her spouse’s income then exceeded that threshold in 2019. According to the applicant, the fact that both situations are treated in the same way and lead to the same result cannot be objectively justified by the objective pursued by the household allowance.

27      In that regard, according to the applicant, it is irrelevant whether he may claim the household allowance in 2020, since the principle of equal treatment was infringed because the 2018 income was taken into account twice. The main objective of the household allowance is to ensure that the household in need receives appropriate financial assistance and it is clear that, under the new scheme, that objective is not fulfilled so far as the applicant is concerned. It is therefore erroneous to claim that the difference in treatment is objectively justified. The requirement for the administration that defines the rules governing staff matters to consider a situation such as that of the applicant was therefore not manifestly impracticable. That leads, at the very least, to an ‘unfair’ definition of entitlements, in particular because no transitional arrangements were drawn up. Taking into account situations such as that of the applicant did not represent an excessive effort, as it was easily predictable. It was not improbable that staff members’ spouses having an income above the threshold in 2018 would then go below the threshold in 2019.

28      The ECB disputes that line of argument.

29      As a preliminary point, it must be observed that relations between the applicant and the ECB, even though contractual in origin, are essentially governed by regulations (see, by analogy, judgment of 14 September 2017, *Bodson and Others* v *EIB*, T‐504/16 and T‐505/16, EU:T:2017:603, paragraph 46).

30      In that regard, it should be borne in mind that the second, third and fifth sentences of Article 9(c) of the Conditions of Employment, in the version applicable to the present dispute, provide, inter alia, that employment relations between the ECB and its staff are to be governed by the general principles of EU law and by the provisions contained in the regulations and that, in interpreting the rights and obligations under the Conditions of Employment, the ECB is to show due regard for the principles laid down in the regulations, rules and case-law which apply to the staff of the EU institutions.

31      Therefore, it must be clarified that the ECB has a discretion in establishing and changing the components of staff remuneration (see, by analogy, judgment of 14 September 2017, *Bodson and Others* v *EIB*, T‐504/16 and T‐505/16, EU:T:2017:603, paragraph 48) and consequently in amending the specific conditions for granting allowances to its staff members. In order to do so, in accordance with Article 13 of the Conditions of Employment, the Governing Council, on a proposal from the Executive Board, is to adopt general salary adjustments, which are to take effect on 1 January of each year.

32      It should be recalled that the principle of equal treatment requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified (judgment of 15 April 2010, *Gualtieri* v *Commission*, C‐485/08 P, EU:C:2010:188, paragraph 70).

33      In a matter involving the exercise of discretion, such as setting the conditions for the payment of the household allowance, the principle of non-discrimination or equal treatment is disregarded where the institution makes a differentiation which is arbitrary or manifestly inappropriate in relation to the objective pursued (see, by analogy, judgments of 15 April 2010, *Gualtieri* v *Commission*, C‐485/08 P, EU:C:2010:188, paragraph 72, and of 30 September 1998, *Busacca and Others* v *Court of Auditors*, T‐164/97, EU:T:1998:233, paragraph 49).

34      In addition, in a matter involving the exercise of discretion, such as the choice to lay down transitional rules which seek to ensure a fair transition from a previous scheme governing staff matters to a new scheme, the principle of equal treatment is disregarded only where the institution in question makes a differentiation which is arbitrary or manifestly inappropriate in relation to the objective pursued (see, to that effect, judgments of 20 March 2012, *Kurrer and Others* v *Commission*, T‐441/10 P to T‐443/10 P, EU:T:2012:133, paragraph 54, and of 14 December 2018, *GQ and Others* v *Commission*, T‐525/16, EU:T:2018:964, paragraph 104).

35      The applicant claims that the application of the new scheme to him gave rise to unequal treatment in comparison with other hypothetical staff members of the ECB. In that regard, the applicant does not contest the actual implementation of the new scheme, but claims that, by considering the same year twice as the reference period for granting the household allowance for two consecutive years, the implementation of the new scheme leads to unequal treatment. Therefore, according to the applicant, the ECB should have introduced transitional measures which would have made it possible to avoid that unequal treatment.

36      As is apparent from paragraph 26 above, the applicant refers to two hypotheses in order to support his arguments concerning the existence of unequal treatment stemming from the implementation of the new scheme. First, his situation is treated in the same way as a member of staff whose spouse’s income exceeded the threshold both in 2018 and in 2019, whereas the income of the applicant’s spouse exceeded the threshold only once, in 2018. Secondly, the applicant observes that a member of staff whose spouse’s income did not exceed the threshold for 2018 would also receive the household allowance in the following year even if his or her spouse’s income then exceeded that threshold in 2019.

37      Therefore, contrary to the ECB’s assertions, in order to assess whether the amendment of the conditions for granting the household allowance led, failing any transitional measures, to unequal treatment vis-à-vis the applicant, both the previous and the new scheme must be taken into account.

38      As follows from the entry into force of the new scheme, 2018 became a reference year for all members of staff on two occasions, used not only for the grant of the household allowance in 2018 but also in 2019, without any variations in spouse’s income in 2019 being taken into account. Thus, different factual situations have been treated in the same way and similar situations have been treated differently.

39      Accordingly, there is a lack of difference in treatment between members of staff whose spouses’ income, like the income of the applicant’s spouse, exceeded the threshold in one year only, in 2018, and those whose spouses’ income exceeded the threshold in two years, in 2018 and 2019, since all those members of staff did not receive the household allowance for two years, in 2018 and 2019. There is also a difference in treatment between staff members in a similar situation, namely the situation in which the spouse’s income exceeded the threshold for one year, in so far as, where that threshold has been exceeded in 2018, the member of staff is denied the household allowance for two years, in 2018 and 2019, whereas, where that threshold has been exceeded in 2019, the member of staff is denied the household allowance only for one year, in 2020.

40      It is necessary to examine, in accordance with the case-law cited in paragraph 34 above, whether those situations correspond to a differentiation which is arbitrary or manifestly inappropriate in relation to the objective pursued by the amendment of the scheme for granting the household allowance.

41      It should be noted that the applicant claims that the unequal treatment stemming from the implementation of the new scheme in his regard is due to the lack of transitional measures, with the result that he was twice deprived of the household allowance on the basis of one and the same reference year.

42      The ECB, for its part, states that, when assessing the justification for the alleged unequal treatment, the applicant merely takes into account the objective of the household allowance, while relying on the lack of a transitional period, thereby disregarding the other objectives pursued by the amendment of the rules. The ECB contends in this respect that the applicant is in fact complaining about the effects which the legislative measure at issue has on his individual situation, that is, by reason of the factual circumstances specific to his relationship, none of which is influenced by, let alone dependent on, the administration that defines the rules governing staff matters.

43      In that regard, it should be recalled, as is apparent from paragraph 35 above, that the applicant does not contest the appropriateness of amending the scheme for granting household allowances, but claims that, by considering the same year twice as the reference period for granting the household allowance for two consecutive years, the implementation of the new scheme leads to unequal treatment. Thus, the ECB’s arguments relating to the appropriateness of amending the scheme for granting the household allowance, which are not disputed by the applicant, are irrelevant.

44      It must be stated that the objective of Article 15 of the Conditions of Employment is to give ECB staff members an opportunity to apply for an annual household allowance in the light of their economic and family circumstances. In that regard, the applicant rightly submits that the main objective of the household allowance is to ensure that the household in need receives appropriate financial assistance in a given year. For that reason, the grant of the household allowance is linked to the annual income of the spouse or partner of an ECB staff member, which makes it possible to establish a link between the household allowance and the development of the financial situation of that household. Therefore, since the household allowance is granted annually on the basis of the gross annual income of the spouse or partner of an ECB staff member, failure to satisfy the conditions for granting it in one year alone should result in the refusal to grant it only for one year and not for several years.

45      As is apparent from paragraphs 38 and 39 above, the application of the new scheme to the applicant resulted, failing any objective justification, in his being treated in a discriminatory manner. Those findings show an arbitrary differentiation and a failure to adapt the new scheme to the different factual situations which may be encountered in practice. They thus reveal a manifestly inappropriate differentiation in relation to the objective of Article 15 of the Conditions of Employment, which is intended to grant ECB staff members who satisfy each year the conditions laid down an annual household allowance adapted to the development of the financial situation of a household on the basis of the spouse’s income in a specific year.

46      As regards staff members in a situation similar to that of the applicant, the implementation of the new scheme has therefore had arbitrary and, at the very least, manifestly inappropriate consequences in relation to the objective of the household allowance. Consequently, the ECB should have foreseen such a situation and introduced a transitional measure making it possible to avoid any such discrimination.

47      In that regard, the ECB observes that the objective of the new scheme is to strike a balance between, on the one hand, the legitimate interest of the service, consisting in ensuring sound and efficient management of financial benefits from public funds and, on the other hand, the interest of all members of staff, consisting in safeguarding their personal financial situation and providing them with a more stable and foreseeable criterion determining their entitlement to the household allowance. In the present case, the mere fact that an allowance is intended to provide support to families does not prevent the administration that defines the rules governing staff matters, within the limits of its discretion, from laying down conditions for granting it or amending those conditions over time, even in a manner unfavourable to staff. According to the ECB, the new scheme is therefore proportionate because, in exercising its discretion, it took due account of the possible consequences and other existing options in order to mitigate the effects of the reform on members of staff. Even though the adoption of the new scheme necessarily meant that 2018 had to be counted twice as the reference year in order to implement the law, that overlap was exceptional and necessary for the purposes of the rapid application and implementation of the reform. Therefore, in its submission, the ECB acted with the necessary diligence, thus enabling members of staff to adapt, if necessary, their situation to the new scheme. That finding cannot, in the ECB’s view, be called into question by the mere fact that the legislative amendment had negative repercussions for a single member of staff for only one year.

48      In that regard, it is true that the ECB’s reason for introducing the new scheme was a legitimate consideration of better management of the financial benefits of members of staff. The fact remains, however, that the new scheme places members of staff who are in a situation similar to that of the applicant at a disadvantage, namely the loss of entitlement to the allowance for two consecutive years where the spouse’s income exceeded the threshold only in 2018, which constitutes a differentiation which is arbitrary and manifestly inappropriate in relation to the objective pursued by the new scheme. As the applicant submits, when the administration reforms the rules relating to the calendar year taken into account when determining a component of remuneration, it is open to the administration to offset, by means of transitional measures, the disadvantages of the reform for certain categories of members of staff.

49      Accordingly, it follows from the foregoing, without there being any need to examine the other pleas raised by the applicant, that the provisions of Article 1(3) of Decision ECB/2018/NP19 of 25 September 2018 amending the ECB Staff Rules, in that they amend Article 3.5.1 of those rules, are unlawful in so far as they did not ensure a fair transition from a previous scheme governing staff matters to a new scheme, by means of an appropriate transitional measure capable of ensuring that members of staff whose spouse’s income, as in the applicant’s case, exceeded the threshold for the grant of the household allowance in only one year would not be deprived of entitlement to that allowance for two consecutive years.

50      Consequently, the contested decision, which was issued on the basis of the abovementioned unlawful decision, must be annulled in so far as the household allowance is not granted to the applicant for 2019.

**Costs**

51      Under Article 134(1) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the ECB has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the applicant.

On those grounds,

THE GENERAL COURT (First Chamber)

hereby:

1.      **Annuls the decision of the European Central Bank (ECB) of 28 January 2019 in so far as it refuses to grant the household allowance for 2019 to GY;**

2.      **Orders the ECB to pay the costs.**

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| Kanninen | Półtorak | Porchia |

Delivered in open court in Luxembourg on 30 June 2021.

[Signatures]

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[\*](#Footref*)      Language of the case: English.