61986C0034
OPINION OF MR ADVOCATE GENERAL MANCINI
delivered on 2 June 1986 (
*1
)
Mr President,
Members of the Court,
1.
On 18 December 1985 the President of the Parliament declared the final adoption of the general budget of the European Communities for the financial year 1986 (Official Journal L 358, p. 1) and in the course of the next two months the Court Registry received no less than six applications for the annulment of that act and/or of the document which promulgated it. Those actions were brought, in chronological order, by the Grand Duchy of Luxembourg (Case 15/86), the Kingdom of the Netherlands (Case 17/86), the French Republic (Case 18/86), the Federal Republic of Germany (Case 19/86), the United Kingdom of Great Britain and Northern Ireland (Case 23/86) and the Council of the European Communities (Case 34/86).
Stressing the need for the Court's judgment to be given before the preparation of the draft budget for 1987, the Council requested, however, that its action, although it was the last to be brought before the Court (on 11 February 1986), should be the first to be considered, and two days later, by a decision based on the second subparagraph of Article 55 (1) of the Rules of Procedure, the President of the Court allowed that request. After it had thus been decided to give priority to Case 34/86, a request by the Parliament for an extension of time for lodging the rejoinder was rejected. For its part, the Council waived its right to lodge a reply and three of the five applicant States (France, the United Kingdom and the Federal Republic of Germany) decided to intervene in its support. The first two of these States submitted written observations and the third contented itself with presenting oral argument at the hearing on 30 April 1986.
This Opinion, therefore, is concerned with the dispute between the Council and the Parliament. It may, however, be helpful to point out that the arguments put forward in support of the other applications, apart from natural differences in emphasis and less comprehensible differences in the figures, are broadly the same as those with which I shall presently deal.
2.
As we all know, this is not the first time that the Community budget has given rise to an action. I would recall to mind Cases 48/81 Federal Republic of Germany v Commission, 72/82 Council v Parliament and 73/82, Council v Commission, the first relating to supplementary budget No 2 for 1980 and to the 1981 budget, the others to the 1982 budget. However, the cases were prevented from proceeding beyond the written stage of the procedure by timely political compromises and they were removed from the Register by orders of 20 January and 14 July 1982. It has also happened that a protagonist in the budgetary procedure has threatened to have recourse to the Court in order to obtain the condemnation of the allegedly unlawful conduct of another institution or Member State. Thus, to give but one of a number of possible examples, the Commission raised an issue on the basis of Article 175 of the EEC Treaty in order to force the Council to cover the Community's needs by appropriate financial measures and to determine the agricultural reference prices.
That is not all. The situation of which the Council complains is anything but new. As we shall see, it has been occurring for years — and certainly since 1975 — and each year with similar, if not identical, features. What, then, is the reason for the stream of actions which I mentioned at the outset? In particular, what is the reason for the applicant's and, especially, the Council's determination and what lies behind their intention not just to apply pressure and to make threats but to obtain a judgment? In my view there are two possible answers to such a question, the first of a legal and the second of a political nature.
From the legal viewpoint there were two factors which in the past restrained the Council from seeking a definitive ruling from the Court. The first — unacknowledged but none the less evident — was its awareness that the machinery established by the Treaty for preparing and adopting the budget was virtually impossible to operate, so much so that, precisely in order to make it work more smoothly, the Council had laid down an internal code of rules and adhered to the interinstitutional declaration of 1982. The other was the uncertainty, which for years exercised a dominant influence on anyone who dealt with Community law, as regards this Court's power under Article 173 to review the legality of acts of the Parliament. Today, at least this second factor no longer exists. After touching on this matter in its decisions on the seat and working places of the Parliament (judgments of 1 February 1983 in Case 230/81 [1983] ECR 255 and of 10 April 1984 in Case 108/83 [1984] ECR 1945) the Court disposed of it once and for all in its recent judgment in Les Verts v Parliament (judgment of 23 April 1986 in Case 294/83 [1986] ECR 1339).
From the political viewpoint, the factors which explain the Council's past reluctance and present inflexibility are to be seen against the background of the determining role of the budget in the natural dialectic between the two representative institutions of the Community. The Parliament's strategy is inspired by the history of Western institutions (who does not remember the trial of strength between the House of Commons and James I?) and a basic forecast: the greater its influence in determining the budget becomes, the less resistible will be its requests for new powers and, by the same token, for greater democracy in the Community system. For its part the Council points to realities which, although unpleasant, are scarcely contestable. Its line of thinking may be presented as follows: Community resources may well be ‘own’ resources and from their nature as such some political scientists may conclude that the budget is already federally oriented; but, with the exception of the ECSC levies, it is still the Member States which gather them in and place them at the disposition of the Community. In brief, it is they who are in fact the taxpayers and it is therefore they who, through the institution which represents them, are entitled to the greater share of the decision-making power on the extent of expenditure.
However, —and this is the point — can such a claim, albeit concealed in clever conceptual disguises, be asserted in judicial proceedings? Even if that is the case, might not the cure be worse than the disease? Is there anything more perilous than entrusting the resolution of constitutional conflicts to the judiciary and thus increasing its already excessive powers? These, I believe, were the doubts which for years caused the Council to refrain from bringing its perennial dispute with the Parliament before the Court. Institutions, however, no less than individuals, may become wearied by a continuous state of attrition and the continuous search for compromises, in particular if after each compromise the adversary's position is strengthened and its demands, based as they are on an increasingly long-lasting and therefore increasingly more ‘legitimate’ practice, tend to augment. The opinion held on the disease and its cure then finishes by undergoing a reversal. Recourse to the Court is admittedly fraught with risk; but only the Court can stop a process in which the applicant's position is progressively weakening at a point where it is still the stronger. It would be just as well, therefore, to knock at the judicial door.
3.
In my opinion this presentation is fully borne out by the facts of the case and the arguments of the parties. Before examining them, however, it is appropriate to set out the legislative background lato sensu to the dispute before us and this means first and foremost analysing the phases in which the preparation and approval of the budget takes place in the light of Articles 203 of the EEC Treaty, 78 of the ECSC Treaty and 177 of the Euratom Treaty (in the texts resulting from the amending Treaties of 22 April 1970 and 22 July 1975). These phases or stages are seven in number.
First phase. After consulting the Economic Policy Committee and before the first day of May each year, the Commission indicates the maximum rate of increase in noncompulsory expenditure (NCE), that is to say expenditure not resulting necessarily from the Treaty or from acts adopted in accordance therewith. In order to ascertain that rate, the second subparagraph (first, second and third indents) of Article 203 (9) stipulates that three macroeconomic data are to be referred to: (a) ‘the trend, in terms of volume, of the gross national product within the Community’ which must be calculated using the GNP index in volume terms and then converted into value terms; (b) ‘the average variation in the budgets of the Member States’ which must be estimated (being a volume indicator) on the basis of the expenditure of the central administration; (c) ‘the trend of the cost of living during the preceding financial year’, which must be measured by means of an indicator capable of converting the volume of the GNP into its value (the GNP deflator).
Second phase. The Commission adopts before 1 July the preliminary draft budget, consolidating therein the estimates of expenditure drawn up by each institution and attaching to it an opinion which may contain different estimates. Before 1 September it forwards the draft to the Council (paragraph (2) and the first subparagraph of paragraph (3) of Article 203).
Third phase. The Council gives a first reading to the preliminary draft. Acting by a qualified majority, it establishes the draft budget and before 5 October forwards it to the Parliament (third subparagraph of paragraph (3) and first subparagraph of paragraph (4) of Article 203).
Fourth phase. The Parliament gives a first reading to the draft established by the Council. Acting by a majority of its members, it has the right to ‘amend’ it in regard to NCE and may, acting by an absolute majority, propose modifications relating to compulsory expenditure (CE). If, within 45 days of receipt of the draft budget, the Parliament has given its approval, or has not amended it or proposed any modifications to it, the budget ‘shall stand as’ or ‘shall be deemed to be finally adopted’. In the event of amendment and/or proposals, the draft is referred back to the Council (third, fourth and fifth subparagraphs of Article 203 (4)).
Fifth phase. As regards the second reading, the Council has 15 days in which to decide on the amendments and proposals submitted by the Assembly. It may modify amendments, acting on a qualified majority. The case of the proposals is more complicated. Those which do not entail an increase in expenditure are deemed to be accepted if the Council does not, acting by a qualified majority, reject them. To those which do entail such an increase the opposite rule applies: they are deemed to be rejected if they are not expressly accepted on the basis of the same majority. Nor is that all. Once a proposed modification has been rejected the Council may, again acting on a qualified majority, retain the amount shown in the draft or fix another amount.
If the Council does not modify the amendments and if it accepts the proposed modifications, the budget ‘shall be deemed to be finally adopted’. If the opposite is the case, the draft is again forwarded to the Parliament (Article 203 (5)).
Sixth phase. The Parliament does not have the power to modify the compulsory expenditure on the second reading. It may, on the other hand, within 15 days after the draft has been placed before it and by a majority of its members and three-fifths of the votes cast, amend or reject the modifications to its amendments made by the Council It may also, ‘if there are important reasons’, and on even more stringent conditions (majority of its members and two-thirds of the votes cast), reject the budget in its entirety and ask for a new draft to be submitted to it (Article 203 (6) and (8)).
As regards NCE, therefore, the Parliament has the last word. However, the exercise of that prerogative is fettered in various respects. It is confined within the limits set by the balance between revenue and expenditure (Article 203 (10)) and may exceed the maximum rate of increase established by the Commission only on two conditions. The first is known as the ‘margin for manoeuvre’: if the increase in NCE resulting from the draft established by the Council is over half the maximum rate initially indicated by the Commission, the Parliament may, exercising its power of amendment, further increase the total amount of that expenditure but only to a limit not exceeding half the maximum rate (Article 203 (9), fourth subparagraph). The second condition is the ‘agreement’ between the protagonists in these proceedings: where, in order to meet the needs of the Community, it is necessary to exceed the maximum rate, a new rate may be fixed, but only in the context of an agreement between the Council, acting by a qualified majority, and the Parliament, acting by a majority of its members and three-fifths of the votes cast (fifth subparagraph of Article 203 (9)).
Seventh phase. When the ‘procedure is completed’ the President of the Parliament ‘shall declare that the budget has been finally adopted’ (Article 203 (7)).
4.
As may be seen from this brief account Article 203 contains two groups of rules which correspond to different objectives and pursue them by different means. The aim of paragraphs (3) to (7) is to organize as rationally as possible the ‘shuttle’ between the Council and the Parliament. The principle from which they take their inspiration is that of the equality of the two institutions upon both of which the right to ‘the last word’ is conferred (as regards CE in the Council's case and as regards NCE in the Parliament's case) and the technique employed consists in requiring specified majorities and in fixing mandatory time-limits (once a given number of days has passed and if a certain majority is not acquired, the text submitted by the opposite party is deemed to be accepted). Paragraph (9) presents quite a different situation. Its object is to regulate the growth in Community expenditure in relation to a maximum percentage which is binding on all the institutions and the rule to which it adheres is that of agreement between the parties. In other words, it is possible to venture beyond that rate only if the ‘diarchy’ of the Community finances agrees on the feasibility and the amount of of the excess.
However, it is not sufficient to stop there. A glance at the ‘travaux préparatoires’ relating to the amendment of 22 April 1970 will show that the two categories of rules are also of different parentage. Thus the ‘shuttle’ is to be found in the Commission's draft whereas paragraph (9) is the fruit of an initiative on the part of the Council, decided in the course of its 102nd session (5 to 7 February 1970). The final communiqué of that meeting (see ‘Les ressources propres aux Communautés européennes et les pouvoirs budgétaires du Parlement européen, Recueil de documents’, edited by the European Parliament, June 1970, p. 157) contains a text virtually identical to that which was then inserted in the Treaty. It may therefore be said that at the root of Article 203 there is hidden, if not an antinomy, then an unresolved tension between different interests and methods.
5.
There lies, in my view, the technical (or at any rate not strictly political) reason for the obstacles encountered by the attempts to apply the provision which falls for our consideration. The following three sections of this Opinion are devoted to those attempts and should not be without value if it is true, as Oliver Wendell Holmes has written, that ‘a page of history is worth a volume of logic’(NY Trust Co. v Eisner, 1921, 256 US 345, 349).
Some introductory remarks are, however, appropriate. The authors of the first amending Treaty discerned in the exceeding of the rate a phenomenon which might at the very least be described as abnormal, so much so that the original version of paragraph (9) (that is to say, the fifth subparagraph of Article 203 (8) of the Treaty of 22 April 1970) considered it practicable only ‘in exceptional cases’. During the following 15 years NCE — which originally consisted only in the amount of expenditure in respect of staff and financing the institutions — increased enormously in volume, rising from 3% to 15% of the budget. This circumstance which, as is clear, was the result of the Parliament's activism and in particular the use it made of its right to the last word, caused the constitutional legislator to review the concept to which I have referred. The exceeding of the rate, it was understood, would become normal, something destined to repeat itself every year, and in the amending Treaty of 1975 the reference to the exceptional nature of the mechanism designed to bring this about was deleted.
Let us, then, examine the practice, which has now lasted 10 years, to which the application of Article 203 has given rise and in so doing take account above all of the procedures followed to obtain the agreement between the two budgetary authorities and of the intentions, sometimes explicit, sometimes unavowed, which presided over their implementation. As I have already pointed out, the parties quickly realized that the achievement of that agreement would be far from easy and would make their already thorny relations even more conflict-ridden. Amongst other things, there were doubts concerning the right moment for concluding the agreement. In those years it was thought that the rule laid down in paragraph (6), according to which the draft is or is to be deemed to be approved within 15 days of its referral back to the Parliament, prevailed over the principle — the possibility of increasing the maximum rate — laid down in paragraph (9). In other words, the agreement on the new rate would have to be reached at the latest on the expiry of that period.
But when, specifically? On this point opinions diverged. That moment had to coincide, according to some, with the opening of the procedure; according to others, with the Council's second reading; and there were others who thought that it had to coincide with the end of the sixth phase and, more precisely, with the brief period which elapses between approval by the Parliament at the second reading and the President's act of declaration. The uncertainty and the resultant fear of not reaching agreement in good time were such that in 1974 the parties waived the application of Article 203 (9). The Parliament withdrew the amendments which might cause the maximum rate to be exceeded and the Council ‘compensated’ the Parliament by undertaking, on the occasion of the Paris Summit between the Heads of State or Government, to approve a supplementary budget.
Clearly, however, the provision could not remain a dead letter and so in 1975 a solution was contrived which, whilst paying lip service to it, in fact set it aside and which, as far as I know, was also followed in regard to the subsequent budgets, or at least those for 1980 and 1983. Under that solution, from the substantive point of view, agreement would be reached not on a new rate but on a total increase in NCE and, from a procedural point of view, the Council's ‘placet’ would appear in the minutes of a session to be held after the second reading and just before the President's act of declaration (it seems however that this device did not always work as it should: Isaac, in ‘La rénovation des institutions financières des Communautés européennes depuis 1970’, published in the Revue trimestrielle de droit européen, 1977, p. 764, says for example that in 1976 the ‘placet’ was issued a few hours after the act of the President).
This procedure had two advantages. The diatribes provoked every year by the classification of expenditure and by the Parliament's use of its margin for manoeuvre were hidden or mitigated. The process whereby the agreement was reached recovered the full political dimension which, according to the parties, should belong to it and which the Treaty had removed from it by directing it to what was, all told, a secondary objective — the laying down of the new rate. Of the latter result, which is of particular importance, there is abundant testimony. I shall confine myself to quoting Mr Cheysson, when he was Commissioner for the Budget, and Mr Aigner. The ‘real discussion on the budget’ which was established between the Council and the Parliament, stated Mr Cheysson on 1 December 1975, had largely exceeded ‘the legal framework’ of Article 203. The decisive importance of ‘the political dialogue’, added Mr Aigner, had put in the shade the time-limits for fixing the new rate, the consequence being that these were ‘not kept to by the Council... or Parliament’. And again: ‘This schematic conciliation procedure does not work. Thus the whole of Article 203 and above all Article 203 (8) [now (9)] are, in practice, inoperable ... We would not have reached any result if we had not both had the courage to override ... these provisions, in a kind of gentleman's agreement, and to find a compromise in the spirit of the provisions’. (Official Journal, Annex No 197, pp. 76, 52 and 53).
6.
The gentleman's agreement had, however, to be presented so as to appear compatible with paragraph (9); otherwise the lip service to which I have referred would have soon disclosed how fragile was the material of which it was made. The Council bowed to this requirement in 1976 by construing the meeting of wills between the two institutions on the total amount of the appropriations for NCE as an ‘implied’ agreement on the new rate; but the expedient, clever in itself, was to cost it dear. In 1978 the Parliament adopted, on first reading, two amendments which increased the funding of the Regional Fund from 620 million to 1000 million UA; and, since on its second reading the Council acquired neither the requisite majority to reject or modify them (paragraph (5)) nor the majority necessary to fix the new maximum rate (paragraph (9)), the amendments became accepted. The Parliament confined itself to noting the procedural trap into which the other party had fallen and its President declared the final adoption of the budget, pointing out that the Council's consent emerged ‘by implication’ from the absence of rejection — and hence from the acceptance — of the Parliament's amendments.
The resulting crisis, as is well known, was resolved by means of the approval of an amending budget but it was not without consequences for subsequent events. I have in mind above all the lesson — forgotten, however, in the present dispute — which the Council and the Commission drew from the way in which the Parliament had understood and applied the doctrine of the implied agreement. Thus Commissioner Tugendhat forcibly argued the need for ‘two distinct decisions’ (my emphasis) and President Lahnstein stated that the ‘budgetary procedure [has not] been completed and the President of the Parliament cannot... declare the budget to be final’ until the parties have ‘reached’ a genuine ‘agreement’ (Official Journal, Annex No 237, pp. 41 and 146). In other words, the agreement is and remains implied, but — if I may be allowed the play on words — must take place expressly. For the new rate to be deemed to be fixed, it is necessary for the two authorities to agree expressis verbis on the total increase in NCE.
I would add that the Parliament's cavalier attitude also gave rise to reactions from the Member States. In particular, Denmark, France and the United Kingdom refused to regard the procedure as completed and concluded that the Community was applying the arrangement of provisional twelfths (Article 204). What is more important — and this is the first instance of a policy which will recur to the point of acquiring in the dispute before the Court a provisional legitimacy (see infra section 9) — those States paid their quotas of ‘own resources’ on the basis of the appropriations approved by the Council on its first reading.
The Parliament, however, was not unduly impressed by this general revolt and all it did was to refine the — perhaps somewhat brutal — strategy of which I have just spoken. Thus, as regards the procedure for approving the supplementary budget 2/1980 (which took place in conjunction with the procedure relating to the 1981 budget), the Parliament had recourse to the margin for manoeuvre which it had not used in the previous year. And since, once again, the Council did not obtain the majority required in order to reject its amendments, those amendments were accepted. The result was that the increase in NCE for 1980 had an impact on the basis for calculating the same expenditure for the following financial year, and the appropriations which resulted therefrom in respect of the maximum rate indicated by the Commission exceeded the measure within which the Council would have liked to contain them.
Another success, then; and this time achieved whilst remaining within the ambit of the margin for manoeuvre. This greater correctness was appreciated and prevented the 1978 coalition from being reformed. Although the Council complained — albeit in mild terms — of a ‘misuse of procedure’, the Commission, through President Thorn, declared that it regarded the budget as ‘existing in law and effective’. For their part, the States acted in different ways. Some of them (Belgium, France, the Federal Republic of Germany) applied the provisional twelfths arrangement — and because of this were accused by the Commission of infringing the rules of the Treaty — or brought the matter before the Court (Federal Republic of Gennany: Case 48/81) whilst asking for the proceedings to be adjourned sine die. Others made payments on the basis of the 1981 budget; among these were Ireland, Italy, the Netherlands, the United Kingdom, without reservations, and Denmark and Luxembourg, with reservations.
But the turn for the better in 1980 was nothing more than temporary. In 1981 there was again a head-on clash and in a manner surprisingly reminiscent of the facts in the case now before the Court. On the second reading the Council increased the appropriations for NCE beyond the limit of the maximum rate and suggested to the Parliament that they should together establish a new percentage. The Parliament rejected this invitation and employed a new expedient: that is to say, it had recourse, leaving aside the exceeding of the rate and just before its President declared the final adoption of the budget, to its own margin for manoeuvre The protests were even louder than in 1978 and this time were not confined to the political sphere. As I recalled in section 2 of this Opinion, the Council brought an action before the Court against (a) the Parliament, in which it sought the annulment of the act of declaration and of the budget annexed to it (Case 72/82), and (b) against the Commission, in which it challenged a measure implementing that budget and, by way of an incidental claim, applied for judicial review of the legality of the budget (Case 73/82).
7.
As we know, yet another accommodation prevented the two cases from taking their normal course. However, the inadequacy of that compromise and of the new manipulative readings of the provision which would surely follow at once became manifest. After so much experimenting and fighting, the time was ripe for a solution no longer designed as a stopgap and thus to be of brief duration but conceived in binding and, so far as humanly possible, permanent terms. An attempt inspired by these ambitions had, moreover, already been made by the Council after the ‘shock’ of 1978. The problems besetting us, the Council had thought, would be resolved not by interpreting or amending the Treaty, but by defining with the greatest possible degree of precision how the crucial paragraphs (5) and (9) are to be applied. In other words, by establishing how far, in terms of substance, the vote on the Parliamentary amendments and on the fixing of the new rate could go.
Hence the launching — approved, with only the Netherlands voting against it, at the meeting of 22 March 1979 — of an internal ‘code’ governing the procedure to be followed on the second reading (see Strasser, ‘Le Budget 1979 — Bilan d'une procédure — Difficultés politiques et juridiques — Perspectives pour une nouvelle année’, Revue du marché commun, 1979, p. 251). Its main purpose was to prevent the amendments accepted by the Council from being incompatible with the maximum rate which the Council considered it could achieve and therefore to compress them so as to bring them back within the limits of the percentage on which the necessary majority for agreement with the Parliament was formed. From the procedural viewpoint, it is worth mentioning letter (c) according to which ‘if the maximum rate adopted by the Council exceeds the declared maximum rate, the Council shall propose that new rate to the Assembly in order to initiate the procedure laid down in the last subparagraph of Article 203 (9)’.
I mentioned the Dutch objection. The Netherlands Government was under an obligation to comply with the terms of a motion approved on 13 February 1979 by the Second Chamber of the States General which required it to reject any interpretation of Article 203 unilaterally adopted by the Council. In that motion it was stressed: (a) that for the purposes of that provision the Council and the Parliament are jointly responsible for the budgetary procedure; (b) that the power in relation to the budget must be regarded as a fundamental power of the Parliament and even more so of a parliament elected, as would shortly be the case, by universal suffrage; (c) that Article 203 must be interpreted by common accord between the two budgetary authorities.
It is possible, and even probable, that the arguments of the Dutch Parliament were correct. But the code of 22 March 1979 contained a defect more serious than that of its uncertain legality: it was, as I have said, ‘internal’; it was binding only on the institution from which it emanated. This weakness explains, on the one hand, why it did not succeed in averting the crises in 1979 and 1980 and, on the other hand, why from those crises there emerged the conviction that the lasting and effective solution which I have mentioned must be based on agreement. It was thus with a view to a result of this kind that efforts began to be made; and they were crowned with success. After rapid, but not superficial, negotiations the Parliament, Council and Commission signed on 30 June 1982 a ‘Joint Declaration on various measures to improve the budgetary procedure’ (Official Journal C 194, p. 1).
The document consists (a) of a preamble, (b) of four parts devoted to the classification of expenditure, to the classification of new budgetary items or existing items for which the legal basis has been changed, to the interinstitutional collaboration in the context of the budgetary procedure and to other matters and (c) of an annex which sets out separately in CE and NCE the items of the 1982 budget. For the purposes of our case Part III and paragraphs (1) and (2) of Part IV are of particular interest.
On the subject of interinstitutional collaboration it is established that ‘[The] discussion of Parliament's views on the Commission's preliminary draft budget, which is scheduled to precede the Council's establishment of the draft budget, shall be held early enough for the Council to be able to give due weight to Parliament's proposals’. A full three paragraphs of Part III are then consecrated to the application of the provision on the maximum rate. It is provided in those paragraphs that if it appears that the procedure may be completed only by fixing, for the increase in NCE, new rates applicable to the payment and/or commitment appropriations (the two rates may be fixed at different levels), the Presidents of the three institutions shall meet immediately. In the light of the positions put forward they shall make every effort to identify the elements on which the Parliament and the Council can arrive at a final agreement before the end of the year. Observance of this deadline is essential to the smooth functioning of the Community. The parties therefore undertake to use their best endeavours to observe it and, should they not succeed in doing so, to continue their efforts so that the budget can be adopted before 31 January. The agreement which the Parliament and the Council reach on the new rate determines the level of NCE at which the budget shall be adopted.
Again in Part III, but this time in paragraph (5), it is provided that the three Presidents shall meet whenever necessary, at the request of one of them, to assess the results of the declaration, consider unresolved problems and prepare joint proposals for submission to the respective institutions. Lastly, paragraphs (1) and (2) of Part IV, which is dedicated to ‘other matters’, contain important clarifications on the Parliament's margin for manoeuvre. It is stated that this margin, which is to be at least half the maximum rate, is to apply as from the draft adopted by the Council at its first reading and is to take account of any letters of amendment. The maximum rate must be observed in respect of the budget under consideration, including amending and/or supplementary budgets. Without prejudice to the determination of a newrate, any portion of the maximum rate which has not been utilized is to remain available for use and may be used when draft amending and/or supplementary budgets are being considered.
There has been no lack of criticism of the document which I have thus summarized but, leaving aside the problem of its binding character, it seems to me that it does not deserve that criticism and that it has had positive effects by virtue of its mere existence. Let us consider what happened in regard to the 1984 budget. The Commission had declared an increase of 11.6% in the maximum rate but in the preliminary draft it had then indicated the need to increase the CE by 34.22% in respect of commitments and by 13.81% in respect of payments over the 1983 base. At the first reading the Council reduced NCE to an amount equivalent to half the maximum rate, whilst the Parliament, disregarding Article 203 (9), refused to enter into any discussion on the basis of calculation and on the rate. In fact, it started from the premise that the basis was not that of the previous budget and that it was right to increase it taking into account both the supplementary budgets 1/83 and 2/83 and — although they were classified as CE in the document of 30 June 1982 — the sums entered as compensation for the United Kingdom and for the Federal Republic of Germany.
And so it came to the second reading. Accepting a series of amendments by the Parliament, the Council remained within the limits of the maximum rate as regards the payment appropriations, but proposed to the Parliament an increase equivalent to 14.9% in the rate applicable to commitment appropriations. The discrepancy was serious and, in spite of attempts to achieve a reconciliation, quickly degenerated into a breach. Having in its turn arrived at the second reading and using the margin for manoeuvre to a degree which the Council considered ‘artificially inflated’, the Parliament took the view that it did not have to agree on the new rate and approved the budget. The Council protested, reminding the Parliament that it had not expressed its consent but the latter did not accept this. Its President stated that he was not of the view that ‘soient réunies les conditions qui déterminent l'application du paragraphe (9)’ and declared the adoption of the budget (20 January 1983).
There followed the usual polemics and the no less customary reactions — this time in the form of reservations on the legality of the budget — on the part of some Member States (France, the Federal Republic). The atmosphere was, however, less threatening than on other occasions. On 23 January, whilst reserving judgment on the classification of certain items of expenditure, the Council ‘took note that the payment appropriations for the financial year 1984 amounted to 27377288363 ECU’ and, less than two months later, acknowledged that the compensation for the United Kingdom and the Federal Republic was classified as NCE. The breach had been repaired by a good will which only the declaration of 30 June 1982 had made possible.
However, if there is a constant factor in the story which I have been unfolding it is that good will lasts no more than a morning. On the very eve of the budgetary procedure which would result in the dispute before the Court, namely on 4 December 1984, the Council adopted a series of ‘Conclusions... on the measures necessary to guarantee the effective implementation of the conclusions of the European Council on budgetary discipline (EP Doc. 1984-85, Doc. 2-1357/84 of 7 January 1985, Annex I). This was in substance a transcription of the internal code which I have examined earlier, in other words a document, which by reason of its unilateral character, had proved to be at best useless and at worst capable of increasing the fears and suspicions of the Parliament; a document which, moreover, the 1982 declaration had, with its undeniable success, helped lay to rest. Why resurrect it, then? Some may see in this move a muscle-flexing exercise. Less maliciously, I would rather speak of a strategic mistake.
8.
The time has now come to summarize the facts of the case. However, before touching on the heart of the matter and in order to avoid the ambiguities to which the discrepancy between the figures supplied by the parties might give rise, it is appropriate to recall that, according to the Council (note from its President dated 9 July 1985), the Parliament had, in adopting the 1985 budget, approved supplementary NCE in the sum of 94.3 million ECU (hereinafter referred to as m ECU) in respect of commitment appropriations and in the sum of 29.6 m ECU in respect of payment appropriations. During the procedure relating to the 1986 budget and unlike the Commission and the Parliament, the Council took as the basis for calculation for the purposes of determining the application of the maximum rate not the amount of NCE finally entered in the new budget but the sum corresponding to the total less the supplementary appropriations I have mentioned. For my part, I will use the figures which appear in the Commission's and the Parliament's documents; notwithstanding the Council's reservations, neither the Council nor any of the Member States has asked the Court to verify whether there were any unlawful acts on the part of the Parliament in the course of the 1985 procedure.
That said, let me now go on to describe the conduct of the parties during the seven phases into which Article 203 divides the budgetary procedure.
First phase. By letter of 23 April 1985 the Commission informed the budgetary authority that the maximum rate of increase in NCE was equivalent to 7.1% over the same expenditure in the 1985 budget.
Second phase. On 31 July the Commission submitted to the Council the preliminary draft budget and pointed out in the first place that it had been based on two events the effects of which would begin to be felt as from 1 January 1986: the decision of the Council of 7 May 1985 which had raised to 1.4% the proportion of VAT destined for own resources and the enlargement of the Community to include Spain and Portugal. The objectives pursued by the Commission as regards the Community of Ten were then indicated. In that respect, having regard to the fact that in the case of NCE the ‘cost of the past’, that is to say the total of the commitments undertaken in the preceding financial years, was now calculated as being10300 m ECU (8200 m ECU of which were for the three structural Funds), it was considered that in order to honour them it would be necessary to appropriate payments of about 4400 m ECU (of which 4000 m ECU in NCE) and it was noted that this would further reduce the already narrow margin available for financing the new Community policies. It therefore appeared essential to limit the growth of commitments and payments in NCO by confining it for 1986 within the limit of the maximum percentage, in the event the 7.1%.
This rule was however subject to exceptions. Thus, in order to cover fully the cost of the past as regards the structural Funds, it would be necessary to have recourse to the reserves in the chapters in point. Similarly, the 7.1% limit would have to apply neither to the payment appropriations for the new policies nor to the specific reserves (Chapter 100) nor to the general reserve (Chapter 101). Finally, as regards the effect of the enlargement, it was stated that the draft ‘carries all the appropriations’ required for the new Member States to participate, ‘from the outset, in all the Community policies’ in accordance with the ‘transitional procedures laid down in the accession agreements’. Over the transitional period Spain and Portugal would receive a financial compensation which would decline with their gradual integration into the Community policies; for the first year that compensation would amount to 87% of the VAT payments (Preliminary Draft 1986, Vol. 7, Commission, Doc. COM (85) 175 EN, p. A/8).
Basing itself on the NCE of the same type entered in the 1985 budget, the Commission calculated that the application of a maximum rate of 7.1% would make it possible to increase the commitment appropriations by another 588 m ECU and the payment appropriations by another 435 m ECU (with the system of calculation adopted by the Council these increases are reduced respectively to 582 and 433 m ECU). In absolute figures, NCE would leap to about 8882 m ECU for commitment appropriations and to slightly over 6568 m ECU for payment appropriations. The total needs identified by the Commission in respect of NCE amounted, however, to more than 10546 m ECU for commitments and more than 9021 m ECU for payments.
Third phase. When it met on 8 July the Council had for the first time applied the ‘conclusions’ of 4 December 1984 fixing the ‘reference framework’ relating to NCE at 8782 m ECU for payments and at 6537 m ECU for commitments. Ten days later its members met a delegation from the Parliament and at the meeting on 17 to 18 September they established the draft budget. That draft envisaged an increase of 578 m ECU, equivalent to 7.08%, in respect of commitment appropriations and of 430 m ECU, equivalent to 7.04%, in respect of payment appropriations. In absolute figures, commitments amounted to 8788 m ECU and payments to 6533 m ECU; compared with the total appropriations in the preliminary draft, they had thus been reduced by about 22%.
In the explanatory memorandum it is stated that the Council took into account ‘the budgetary effects arising from the accession to the Communities of two new Member States ... [and] endeavoured to see that [they] participate in most Community policies from their first year of membership’. The Council was, however, ‘prepared to reconsider the appropriations entered against the ERDF and the ESF at the second reading of the draft budget and to ensure on that occasion that the amounts necessary to comply with the commitments arising out of the accession negotiations in respect of [Spain and Portugal] are made available to the countries concerned, taking into account the repetition of the commitment appropriations and payment appropriations entered in the 1985 budget for the Ten’.
The explanatory memorandum goes on to say that in carrying out its own task the Council also examined the ‘complex’ issue of the cost of the past and was persuaded that the solution of that problem would have to be found by both arms of the budgetary authority ‘together’ and would perforce be ‘spread over a number of financial years’. It had therefore given the Presidency an exploratory brief ‘to look into the matter with the Commission in cognizance of the views [of the Parliament] and to work out the broad lines of a solution’. (Draft general budget of the European Communities for the financial year 1986 established by the Council on 17 and 18 September 1985 in Luxembourg, Vol. 7, Council Explanatory Memorandum, Doc. 9336/85 (Budget 12), pp. 9 and 10).
Fourth phase. When it set about examining, on its first reading, the Council's draft, the Parliament was aware of the serious limitations placed on its powers of initiative, but also of the responsibility which it would have to assume. According to the Commission's calculations the margin for manoeuvre (namely the possible increase in NCE as compared with the Council's draft budget) amounted to 294 m ECU for commitments and 217 m ECU for payments and so, apart from the possibility of exceeding the maximum rate, it would be possible to increase NCE only by 882 and 652 m ECU respectively. On the other hand, disturbing prospects emerged from a note which the Directorate-General of Budgets had drawn up on 16 October 1985. ‘Il résulte du tableau’, it was stated in that note, ‘que les crédits du projet... ne permettent même pas d'assurer les besoins nécessaires pour la poursuite des politiques existantes (y compris le poids du passé normal) et le lancement des nouvelles actions et que, par conséquent, le poids du passé excessif et les dépenses relatives à l'élargissement ne sont pas couverts’.
The debate on the budget took place in plenary session on 9 October and 11 to 12 November in the presence of the President of the Council, Mr Juncker, and Commissioner Christopherson. In view of the light which that debate sheds on the arguments of the parties it is appropriate to summarize it in some detail.
Explaining the thinking behind the document drawn up by his own institution, Mr Juncker pointed first of all to its still incomplete ‘accession’ component and to the Council's awareness ‘that this was but a first step’. However, he energetically defended the decision to assign to the two large structural Funds everything that fell within the 7.1% limit. ‘It is not illegal’, he said, ‘to respect the maximum rate during the present phase of the ... procedure. It is not illegal for the President of the Council to note the absence of the qualified majority required ... in order to fix a new rate. It is not illegal for the Council to indicate the position it will have to take at its second reading’ (Official Journal, Annex No 2-330, p. 119).
Commissioner Christophersen's intervention was of an altogether different tenor. The Council's choices, he stated, left two major problems unresolved: how to finance the enlargement and how to absorb the cost of the past. The Treaty of Accession obliged us to honour the economic commitments we had undertaken. By reducing the Commission's figures by over 700 m ECU, the Council had ‘ignored’ these commitments; and it was only to be hoped that the Council was sincere when it declared itself ready to eliminate at its second reading this ‘unreasonableness’vis-à-vis the new Member States. As regards the cost of the past, the level at which the draft budget fixed the payment appropriations might have a drastic impact on the activity of the structural Funds. If those figures were approved, then, for example, ‘the Social Fund will by and large have to stop operating before we are halfway into 1986’ (Official Journal, Annex No 2-330, pp. 120 and 121).
No less harsh was the criticism which came from the members' benches: some of this criticism was methodological in nature (in establishing a draft ‘plus a series of intentions’ to be given effect on the second reading, it was said, the Council had attempted to ‘reduce Parliament's first reading to a charade’: Messrs Fich and Van der Wring, Official Journal, Annex No 2-330, p. 123, and Annex No 2-332, p. 25); other criticism was directed to the matters touched on by Commissioner Christophersen. The provision on the maximum rate, asserted in particular Mr Fich, applied in ‘comparable situations’ and that was not the case ‘when we are changing from 10 to 12 countries! ...It is obvious that the figures in the Community — the gross national products — will rise [by] about 9% and inflation has to be added to that. [So,] just to maintain the present level, we would get an increase of [around] 16%, which is far from the rate calculated in purely mathematical terms on the basis of Article 203’ (Official Journal, Annex No 2-332, p. 123). The commitments of the past, added Mr Christodoulou, were to be regarded as ‘additional expenditure., beyond the ceiling, since they are quite unrelated to the current and regular annual increases of the ceiling specified in Article 203’ (Official Journal, Annex No 2-332, p. 11).
At the session on 14 November the votes were taken which saw NCE rise by 1764 m ECU in respect of commitments and by 1784 m ECU in respect of payments. In absolute figures, that expenditure rose by 10185 and 8132 m ECU, thus remaining about 6.3% lower than the expenditure appearing in the preliminary draft, whilst its rate of increase over the 1985 base was equivalent to 35.6% (commitments) and 27.1% (payments). By way of a gloss on its own amendments, the Parliament approved a resolution which abounded in criticisms of the Council. In particular it was deplored that by applying ‘its internal rules’ the Council had ‘not given a complete first reading’, had submitted to the Parliament ‘a truncated draft budget’ and had ‘acted in breach ... of the Treaty’. It was also found unacceptable that, contrary to Article 199 and the provisions on the structural Funds, ‘the Council did not enter all expenditure in the budget’ and that ‘neither the expenditure for an enlarged Community nor appropriations for the contractual obligations for which payment has fallen due were ... taken into account’ (paragraphs 10 and 11).
Fifth phase. At the second reading (26 to 27 November) the Council approved supplementary appropriations for the enlargement equal to 500 m ECU in respect of commitments and 321 m ECU in respect of payments. It also asked the Commission to submit in 1986 an amending budget for the purpose of realizing the objectives which it had set when it proposed, in the preliminary draft budget, a reserve of 250 m ECU in CE. As regards the cost of the past the Council then fixed an amount of 400 m ECU, 196 m ECU of which were for the ERDF and 204 m ECU for the Social Fund. In deciding to enter these sums it declared itself in favour of spacing out the absorption of the cost of the past over the following financial years. It stated, however, that the period to be prescribed for that purpose ‘is longer than that envisaged by the Commission’ and requested the latter to ‘exercise maximum flexibility... in order to ensure smooth operation’ of the structural Funds.
In its appraisal of the Parliament's amendments the Council adhered to a precise criterion: that is to say, it decided that, since both parties were obliged to assume the same responsibilities, a proportion of the expenditure for the enlargement and for the elimination of the cost of the past should be borne by the Parliament's margin for manoeuvre. The upshot was that the amendments were accepted in the sum of 121.9 m ECU for commitments and of 100 m ECU for payments (Draft general budget of the European Communities for the financial year 1986 with amendments and proposed modifications, Introduction, Doc. No 1, 10773/85 (Budget 14)). In absolute figures, the amount of NCE which resulted from these decisions came to 9278 and 7254 m ECU respectively. It was thus 20% lower than the corresponding sum in the Commission's preliminary draft budget.
With this there came to an end a stage in the procedure which would carry decisive weight in the final negotiations between the two authorities. In conformity with the results of that stage the Council proposed to the Parliament in a letter dated 29 November 1985 that for the 1986 NCE the following maximum rates of increase over the 1985 base should be fixed: 20.5% for payment appropriations and 14.63% for commitment appropriations.
Sixth phase. The Parliament devoted its sessions on 10 and 12 December to its second reading. The first speech was again made by President Juncker and, not surprisingly, exhibited all the marks of a harangue. This time, he said, let there be no talk of mistakes on our part: the Council has respected the commitments it has entered into on the matter of the enlargement, even undertaking to examine a draft supplementary budget, and has earmarked the appropriations requested by the Commission for the Social and Regional Funds. It was undeniable, replied Commissioner Christophersen, that Juncker's peroration was at least in part to the point. Distancing itself from the thinking which had guided it at the first reading, the Council had in fact taken ‘a step in the right direction, particularly on the question of the enlargement’. The expenditure for this was in fact largely covered by the appropriations decided on at the second reading (Official Journal, Annex No 2-333, p. 41).
For all that, added the Vice-President of the Commission, the text referred back to the Parliament did not satisfy the Commission. Although it had recognized for the first time that there was a problem of the cost of the past, the Council was in fact far from having resolved it. To cover that cost there was still a ‘shortfall [of] about 900 m ECU’. Instead the Council has inserted a declaration, which was besides highly questionable since the very narrow margins offered by the rules of the Social Fund would make it difficult for the Commission to be ‘flexible’ in its administration, as was desired of it. The Commission was therefore counting on the Parliament: it was for the Parliament to make the ‘effort’ needed ‘to arrive at a budget which is better and clearer than the one prepared by [the] Council... ’ (Official Journal, Annex No 2-333, pp. 41 and 42).
So meagre and repetitive was the ensuing Parliamentary debate that it is not worth dealing with it. The time for speeches was, in any event, over and the far more exciting time for the negotiations on the increase in the maximum rate was beginning. Those negotiations took place in one hectic day: 11 December. The first move was made by the Parliament which proposed that the appropriations decided on at the Council's second reading should be increased by an amount of 569 m ECU for NCE, but that offer was rejected. The Council instead asked its President to negotiate personally with the other party, but stipulated that he must keep within the margin for manoeuvre provided for in the fourth subparagraph of paragraph (9). Convinced that he could not offer the Parliament something which was ‘its by right’, Juncker rejected the mandate. The stipulation was then lifted. To the representatives of the Assembly, who would have to be in possession of a mandate to arrive at an agreement, Juncker was free to make all such counterproposals as he thought fit. The Council would then evaluate their reply.
The figures submitted by Juncker are known: to the appropriations decided on by the Council there would be added 242 m ECU, including the margin for manoeuvre, for payments and 196 m ECU for commitments, with an increase in the maximum rate equivalent to 24.46% and 17.02% respectively. It was a step forward: but not to the liking of the Parliament or the Council. The latter, indeed, decided that, should the negotiations fail, its proposal would be reduced to the ceiling — 20.5% — established at the second reading. The situation was hardly encouraging. Juncker, however, held firm and during the night obtained for the line he had taken the votes of nine out of the 10 governments. Agreeing to a request by the Parliament's representatives, the Council also approved a joint declaration in which the two authorities undertook to guarantee ‘the necessary... resources to ensure the ... normal operation of the structural Funds in 1986’; however, almost as if to offset that concession, it then repeated its own views on the cost of the past and proposed to the Assembly to eliminate the effects thereof on the volume of NCE for future financial years (Official Journal, Annex No 2-333, pp. 241 and 242).
At this point, events moved swiftly. The Parliament decided to raise the stakes and on 12 December adopted a resolution the most important passage of which may be summarized as follows: the exceptional expenditure which the Community would have to meet in 1986 in order to honour the commitments related to the enlargement and to provide for the cost of the past ‘have no equivalent of the same nature in the 1985 budget’. It concluded that ‘this expenditure is not subject to the Treaty provisions’ concerning the maximum rate of increase in NCE and that therefore ‘the procedure laid down in Article 203 (9) ... is not applicable in the present instance’. The Parliament therefore had the right and/or duty to amend the draft budget once again. Words were then followed by action. The amendments were voted and NCE increased by 492 ECU (19.53%) for commitment appropriations and by 563 in ECU (29.73%) for payment appropriations. When he learned of this, President Juncker made the following statement: ‘I have noted the vote by Parliament which has rejected the proposals I made on behalf of the Council. The proposal... was conditional. The Council accordingly reverts to the position it adopted at the second reading on 26 and 27 November’ (Official Journal, Annex No 2-333, p. 246).
Seventh phase. On 18 December the President of the Parliament declared, pursuant to Article 203 (7), that the budgetary procedure was completed and that the general budget was finally adopted. He informed the Council of this by registered letter of 19 December which reached the Council four days later.
9.
As I said in the first section of this Opinion, the Court decided to give priority to the examination of Case 34/86, thus ‘freezing’ similar applications by five Member States even though these were lodged sooner. At this point it is appropriate to recall that on 28 January 1986 (Case 23/86 R) the United Kingdom submitted an application pursuant to Articles 185 and 186 of the Treaty which was lodged at the Court Registry on 13 February. The object of that application was to obtain, before the Court's judgment in the main proceedings, an interim order which would authorize the United Kingdom Government to pay for the 1986 financial year by way of VAT own resources sums not exceeding those resulting from the Council's second reading. According to the application the increase in NCE to which the Parliament's last reading gave rise might lead the Commission, as the authority which implements the budget, to call on the Member States for contributions higher than the sums which the Community is entitled to demand.
By order of 17 March 1986, the President of the Court, by way of an interim decision, ordered as follows: ‘The Commission shall implement, until 10 July 1986 or until the date on which the Court delivers its judgment in Case 34/86 ..., whichever date shall be the earlier, the budget for the financial year 1986, as regards both payment appropriations and commitment appropriations, on the basis of the draft budget established by the Council at its second reading on 27 November 1985 subject to those amendments decided by the Parliament on 12 December 1985 which do not have the effect of increasing noncompulsory expenditure’.
10.
The applicant requests the Court: (a) to annul the budget for 1986 to the extent that, as a result of the amendments adopted by the Parliament on its second reading, the commitment appropriations and the payment appropriations for NCE exceeded by 293828185 ECU and 527383692 ECU, or by such other amounts as may be determined by the Court, the new rate of increase proposed by the Council; (b) to annul that budget to the extent that the Parliament amended, at its second reading, certain budgetary lines which constituted CE (see Annex XVIII to the application); to declare that in declaring the budget finally adopted the President of the Parliament infringed Articles 78 (7) and (9) of the ECSC Treaty, 203 (7) and (9) of the EEC Treaty and 177 (7) and (9) of the EAEC Treaty; (d) alternatively, annul the budget for 1986 in its entirety; and, as a consequence, annul, the act of the President of the Parliament and indicate which of the effects of the budget are to be regarded as definitive.
In support of its claims under (a) and (b) — partial annulment of the budget — the Council states that it has had regard to the requirements of the proper functioning of the Community in a financial year which has seen the accession of two new States.
11.
The examination of the problems thus posed will occupy us for a considerable time. However, it must be preceded by an examination of the arguments which, although they do not raise a formal objection, the Parliament has put forward in support of its contention that the Council's application is inadmissible. The grounds on which they are based relate to: (a) the rules of the Treaty on the jurisdiction of the Court in actions for annulment; (b) the rules which govern the budgetary procedure; (c) the effects which an annulment by the Court would have on the subject-matter of this action.
As regards the first point the Parliament states that Articles 173 of the EEC Treaty and 146 of the EAEC Treaty do not envisage a review of the legality of acts of the Parliament. Nor would it be correct to construe them widely if it is true that a proposal by the Commission, which was precisely designed to confer on the Parliament the right to bring and the capacity to be made a defendant to proceedings, was not accepted by the Conference of the Representatives of the Member States which took place in Luxembourg in December 1985 and this does not appear among the modifications which the Single European Act makes to the Treaties. In any event, and now I pass on to the second point, an examination of the rules governing the procedure whereby the budget is prepared, approved and adopted compels the conclusion, according to the Parliament, that: (1) the President's act of declaration is not as such open to challenge before the Court; (2) the budget may not be regarded as the act of ‘an’ institution.
The Parliament argues that to hold that the act of its President may be annulled presupposes that it is constitutive in nature, that is to say, that it transforms the draft into the budget. That is not the case, unless it is further assumed that the President is himself, like the Council and the Parliament though distinct from both of them, a budgetary authority. His act, which, moreover, comes when the budget has been adopted (Article 203 (5) and (6)), is therefore declaratory and as such cannot be contested. As regards the budget in se and per se, it is common knowledge that it is a document produced jointly by the Council and the Parliament. Besides, its character as a combined act emerges clearly from the rules on the procedures for approval; and that a combined act is not subject to review is demonstrated by Article 176 according to which the obligation to take the necessary measures to comply with the judgment declaring an act void rests on the institution (in the singular) whose act it is.
The third argument, as I have said, centres on the incongruity of the effects which, it is said, would be unleashed by the judgment which the Court is requested to give. One of two things would happen: if the judgment annulled the budget in its entirety, the Parliament could comply with the judgment only with the aid of the Council, thereby infringing Article 176 which I have just cited; if, on the other hand, it annulled it in part, it would finish by conferring binding effect on a preparatory act which the draft approved by the Council at its second reading unquestionably is.
Those grounds of inadmissibility, concludes the Parliament, do not mean, however, that the Community budget cannot be subject to review by the Court. It can be made subject to review, but by using different procedural means. In particular, there is nothing to prevent the Court from hearing and determining an action challenging an implementing measure of the Commission and at the same time requesting, on the basis of Article 184, an incidental ruling on the validity of the budget. Besides, this was precisely the procedure employed by the Council in Case 73/82 which was later withdrawn (see section 6 above, in fine).
12.
With one exception, which I shall point out when I examine the Council's principal claim, the arguments summarized above cannot be upheld. The second argument, for example, confuses two different concepts, those of procedure and act. No one denies that the budget is adopted at the end of a common (or, rather, complex) procedure. However, and this is the point, that procedure does not constitute an act of which it may be asked whether it is valid or not. Legally, the budget is only ‘un compte ou plus exactement un ensemble de comptes’ (Gaudemet and Mounier, Finances publiques, 4th Edition, Paris, 1983, p. 250); or, if one prefers, an accounting document which contains two statements relating to the revenue to be realized and to the expenditure to be provided for within a given period of time (Buscema, ‘Bilancio dello Stato’, in Enciclopedia del Diritto, V, Milan, 1959, p. 378; Duverger, Finances publiques, 8th Edition, Paris, 1975, p. 213). It is annexed to the act which promulgates it; and there can be no doubt that in the Community system that act is to be attributed to the Assembly alone or, more specifically, to its President.
I would add that, as is shown by the Entstehungsgeschichte of Article 203 (7), this attribution is far from having a purely formal content. When the Council's monopoly on the authorization of revenue and expenditure came to an end, the right to declare the adoption of the budget was left to its President, as if to stress that the master of the procedure still remained the body which represented the States. The transfer of that right to the President of the Parliament, which was brought about by the amending Treaty of 1975, thus had a precise significance: that is to say, it was intended to mark in solemn fashion the definitive investiture of the Parliament as a financial authority pleno iure.
Now that this point has been clarified, the others — the nature of the act whose author is the President and whether it is amenable to judicial review — do not pose unduly difficult problems. The first requires that clarification be given on the power to adopt the budget. If that power must be regarded as carrying with it the authority to implement the budget — and inasmuch as it is the counterpart to the power of rejecting the budget I do not see how it cannot be so regarded — the presidential measure is necessarily of a constitutive nature; that is to say, it marks out the budget and renders it recognizable by endowing it with typical and unalterable features or, to use more direct terms, it confers on the budget the capacity to produce external legal effects. Nor let us be deceived by the use made by the Treaty of the verb ‘to declare’ in regard to the President. Article 203 (7) provides that the President ‘shall declare that the budget has been finally adopted’, that is to say that the two authorities have finalized that ‘compte’ or document, in itself legally infertile, of which I have just been speaking. No less than that, but no more either.
As regards the second question, then, all that is needed is to refer to the case-law of the Court. We already knew from its decision on the seat of the Assembly that the acts of the latter, at least when they concern the Treaties ‘simultaneously and indivisibly’, may be contested under Article 38 of the ECSC Treaty; today, however, that is to say after delivery of the judgment in Les Verts, we know that the same result may be obtained under the much more liberal conditions contained in Article 173 of the EEC Treaty.
It may be said that not even this fundamental acquis is sufficient to ensure the admissibility of the present action. In Les Verts, the Court stated that only ‘les actes du Parliament... destinés a produire des effets juridiques vis-à-vis des tiers’ (paragraph 25) are open to challenge, and the formula employed by the Court to distinguish between its own review and that of the Court of Auditors (paragraph 28) might suggest that, in its opinion, it is not the measure by which the budget is promulgated that is capable of producing those effects but ‘l'acte de droit dérivé dont découle [la] dépense’, namely the measure which implements an item in the budget. However, I doubt whether that minimalist reading of the judgment is correct and in any event I believe that the budget, once promulgated, creates rights and obligations no less, and often more, important than those which a large part of Community legislation brings into being. One only has to consider, to mention the most important of those effects, the mandatory fixing of the rate on the basis of which the Member States pay in the VAT own resources.
To conclude on the procedural aspects of the case, I would like to stress that the contestability under Article 173 of the President's act is not called in question by the existence of other means of redress. In particular, the procedure suggested by the Parliament is to my mind profoundly unsatisfactory. It is so because it requires parties to wait for the issue of a measure connected with the disputed items or with the sums determined in contravention of the rules governing the budgetary procedure. It is so, too, because it entails the bringing of proceedings against an institution which is not responsible for the defect invalidating the budget. On the other hand, an action against the Commission seems to me appropriate when the issue is the manner in which it implements a budget which has no procedural defects.
13.
Let us now turn to the substance of the case. In the Council's opinion, the act whereby the President declared the budget is invalidated by an infringement of essential procedural requirements inasmuch as its author considered the procedure to be ‘completed’ within the meaning of Article 203 (7). On the other hand, the defect which, according to the Council, invalidates the budget is the infringement of the Treaty and in particular: (a) Article 203 (9), inasmuch as the Parliament unilaterally increased NCE to an extent greater than the rate resulting from the draft approved by the Council at its second reading; (b) Article 203 (5) and (6), inasmuch as the Parliament modified at its second reading certain budgetary lines which constitute CE.
I would observe at once that, like the arguments put forward by the Parliament in support of its contention that the action is inadmissible, the last two criticisms stem from an erroneous concept of the budget as an act which as such is open to challenge. The order of the phases in the procedure governed by Article 203 requires however that those criticisms be examined first, starting with that under point (b). The applicant, I must then say, does not indicate all the items the classification of which the Parliament is said to have changed arbitrarily but only those which incorporate a global increase in appropriations; in particular it mentions the ‘new’ lines and, among the old, cites the expenditure under Articles 450 and 926 which had been classified as CE both in previous budgets and in the annex to the interinstitutional declaration of 30 June 1982.
The criticism under (a) on the other hand is concerned with the absence of an agreement between the parties on the fixing of the maximum rate. The seriousness of such a defect, it is remarked, is proportionate to the extraordinary constitutional importance of the provision which requires the Council's assent. As regards NCE it constitutes the sole genuine guarantee available to the Member States: in other words, the parties on whom, in a system which ensures the balance between revenue and expenditure by calling in a percentage of VAT, falls the burden of financing the increase in Community expenditure.
For the Agent of the French Government these points are of a ‘simplicité lumineuse’. Not so for the Parliament which has vigorously disputed them, maintaining primarily that it acted with full regard to the rules of the Treaty and, secondarily, that it adopted the position for which it is criticized both ‘in the interests’ of the Community and because it was ‘constrained’ by the Council's unlawful conduct. Let us examine its arguments, beginning with its first line of defence which is largely devoted to the problem of the maximum rate. On the question of the nature of the expenditure the defendant avoided the problem by merely observing that the classification of the budgetary lines was not a matter for the Council alone and leaving it to the Court to appreciate the reasons which persuaded the defendant to classify the lines in dispute as noncompulsory.
Let us then turn to the rate. The Parliament considers that it is not obliged to comply with it as regards the ‘unavoidable’ appropriations, that is to say those necessary in order, on the one hand, to honour the commitments undertaken towards Spain and Portugal and, on the other, to absorb the cost of the past. The reasons which lead it to that conviction are of two kinds. The first had already been expounded in the resolution of 12 December: although they are in the nature of NCE, states the defendant, the said sums have no equivalent in the 1985 budget, and indeed in the preliminary draft the Commission excluded them from the application of the rate. The first three paragraphs of Article 203 indicate that, should an agreement prove to be impossible, the two arms of the budgetary authority must adopt the method followed by the Commission. And the Parliament did no more than that.
The second reason has to do with the margin for manoeuvre. The Parliament, it is pointed out, is entitled to operate it by reference to the rate which appears in the draft established by the Council not at its first, but at its second, reading; and, if that is the case, there can be no doubt that it kept within the limits of the margin. This view, it is true, is in contradiction with the provision of the interinstitutional declaration according to which the margin ‘shall apply as from the draft budget., as adopted by the Council at the first reading’ (Part IV, paragraph (1)). The declaration, however, is not Holy Writ. What matters is the Treaty; and the Treaty leaves room for the interpretation just given. Article 203 (4) speaks of ‘draft budget’ without specifying the reading in connection with which the Council prepares it.
The secondary arguments centre, as I have said, on the unlawful nature of the Council's conduct. The incomplete nature of the draft established by the Council at its first reading and its belated insertion of the appropriations for the ‘unavoidable’ expenditure constituted a ‘misuse of procedure’. That defect in its turn had repercussions on the powers of the Parliament, thereby distorting the balance, ordained by the system, between the two arms of the budgetary authority. The Parliament's complaints are primarily that (a) it could only carry out a ‘formal’ first reading, (b) that it had to use its own margin for manoeuvre to take account of the appropriations omitted by the Council and (c) that it was constrained at the second reading, out of respect for the principle laid down in Article 199, to exceed the maximum rate in order to provide for the cost of the past.
14.
In my opinion the Court may, in ruling on the issues which I have thus summarized, leave aside the problem of the classification of expenditure and in particular refrain from establishing the criteria in the light of which CE and NCE are to be distinguished. If, as a result of such an exercise, the expenditure in dispute should prove to be compulsory, and thus subject to the ‘last word’ of the Council, the charge which the latter levels against the Parliament would seem to be entirely well founded. If, on the contrary, the lines in question were to be regarded as NCE, the use which the Parliament made of them at its second reading would lead us to find that the maximum rate had been further increased: their legality would then depend on the Court's decision on the principal claim.
We may therefore now turn to that claim. I would observe in the first place that there is something singularly déjà vu about the arguments with which the defendant contests the merits of the claim. It had had recourse to them as early as the debate on the 1975 budget (see resolution of 14 November 1974, Official Journal C 155, p. 33) when it distinguished between appropriations relating to the measures in force, complementary appropriations and appropriations for new activities. They also echo, however, the polemics which followed the approval of the Financial Regulation of 21 December 1977 and the consequent introduction of differentiated appropriations. The Parliament then held the view that commitment appropriations must be excluded from the maximum rate and, through Mr Adonnino, it reverted to that view during the 1981 procedure (EP Sess. Doc. I-540-80, p. 128).
These arguments are therefore not new; but that does not make them any more acceptable. As had already been pointed out in academic commentary (see Ehlermann, ‘Applying the new budgetary procedure for the first time’, Common Market Law Review, 1975, p. 340; Sopwith, ‘Legal aspects of the Community budget’, Common Market Law Review, 1980, p. 330), they conflict with the letter and the aims of Article 203. From the text of that article it is plain that in determining the maximum rate the first subparagraph of paragraph (9) covers all noncompulsory expenditure. It states that the rate shall be fixed ‘in relation to the expenditure of the same type to be incurred during the current year’: in the absence of anything to the contrary, the words ‘of the same type’ cannot possibly not be understood as referring to the words ‘for the total’ (NCE) contained in the subparagraph. I would add that the provision with which we are concerned confers on the Parliament the right to the last word but assigns to this the limit constituted by the rate calculated by the Commission and allows that rate to be exceeded only in so far as the Council gives its consent to this. To exclude certain expenditure from the application of the rate by describing it as ‘unavoidable’ would therefore deprive the rate of a crucial part of its ‘effet utile’.
Nor is it true that the appropriations related to the enlargement and the cost of the past have no ‘equivalent’ in the 1985 budget. ‘Cost of the past’ is an expression that has faint echoes of Hollywood about it; but the expression itself shows that the phenomenon which it designates is not a flower which suddenly blossomed in the summer of 1985. The truth is that the Commission, Council and Parliament have been coming to terms with this ‘cost’ since at least 1978. And the same is true as regards the expenditure for the enlargement. An enlargement after the amending Treaty of 1975, had already taken place with the accession of Greece. The present enlargement is more considerable, so much so that it justifies exceeding the rate. However, the difference is one of quantity, not nature, and there is no doubt that appropriations of the same nature appeared in the budget in past financial years.
No less tenuous is the second argument to the effect that, in the event of disagreement between them, the parties are faced with the obligation to adhere to the method followed by the Commission. To begin with, I do not accept that the Commission adopted the method to which the Parliament refers. Some passages in the political introduction to the preliminary draft budget suggest that it was considered expedient to exceed the rate as regards the two categories of expenditure; but to ascribe to the Commission an intention to exempt either category from the application of the rate is too great a step to compass. Let us assume, however, that there was such an intention: its obvious incompatibility with the Treaty would make it incapable of creating obligations for anyone at all. Nor let it be said that in providing at its second reading for an increase in the appropriations with a consequent exceeding of the rate, the Council tacitly adhered to that intention, for no sooner had the increase been decided than it proposed to the Parliament the new rate of 20.5%.
Lastly, the margin for manoeuvre. It will be recalled that the defendant maintains that it could have recourse to that margin in relation to the rate fixed by the Council at its second reading; but that opinion, too, is unfounded. Let us read again the fourth subparagraph of paragraph (9) : ‘If’, it says, ‘... the actual rate of increase in the draft budget established by the Council is over half the maximum rate, the Assembly may ... further increase the total amount [of the NCE] to a limit not exceeding half the maximum rate’. I do not think that this text is, as the Parliament would wish, neutral. On the contrary, it seems plain to me that when it speaks of the ‘maximum rate’ the provision is referring to the percentage calculated by the Commission (the same words appear in the first three subparagraphs of paragraph (9)) and that, in using the participle ‘established’, it has in mind the Council's first reading. As is shown by the last subparagraph of paragraph (3), and, a contrario, by the whole of paragraph (5), it is in that context, and in that context alone, that the institution establishes the draft budget.
It also follows from these observations that there can be no overlapping between the margin for manoeuvre and the new rate. In giving its consent to the latter the Parliament automatically waives its right to use the former, which, however, may have been taken into account in the ‘political’ context of the negotiations for the fixing of the final percentage.
15.
Accordingly, the Parliament's first line of defence does not stand up to close scrutiny. What is there to be said about its second line of defence? The applicant and the intervening States have no doubts: it is unfounded from beginning to end. First of all, it is not true that the application of the ‘code’ adopted by the Council in December 1984 compresses the Parliament's powers: that set of rules is in fact fully in conformity with the Treaty. Secondly, it is wrong to say that the Council's first reading was deficient in regard to the ‘unavoidable’ expenditure and that the second reading had to make good its mistakes. On the contrary, points out the United Kingdom, that reading ‘represented a serious effort... to reach an agreement with the Parliament’ (United Kingdom's statement in intervention, p. 8). Finally, it is absurd to claim that the Assembly was constrained to carry out only a formal first reading: that is proved ad abundantiam by the trenchant proposals for modification and the no less vigorous amendments which emerged from that stage of the procedure.
As regards in the next place Article 199, continues the applicant, there can be no doubt that the defendant is wrong in invoking it That provision, in fact, is intended to prevent ‘parallels’ budgets (or, more correctly, extra-budgetary administration) by requiring that expenditure be totally covered. It therefore does not preclude the budgetary authority — and particularly the authority which represents the States — from making a political assessment of needs and priorities within the framework of its own discretionary power. This is precisely what the Council did at its first reading as regards the needs deriving from the cost of the past or the accession of Spain and Portugal. Nor can its conduct — inspired as it was by the need to ponder more deeply on those difficult matters — be said to be unreasonable or, worse still, unlawful. In any event, it is not for the Court to substitute its own assessment for that of the budgetary authority. The Court may only verify whether manifest errors or a misuse of powers can be ascribed to the Council.
However, those points — with the exception, of course, of the last, in which it is impossible not to concur — seem to me formalistic and in substance quite feeble. It is undeniable that the Parliament voted amendments and made use of its margin for manoeuvre at the first reading. What is equally certain, however, is that the strategy employed by the Council went against the rules of the game: by this I mean those rules on the observance of which depends the satisfactory outcome of the dialogue between institutions which the system of the ‘shuttle’ and the two double readings is intended to ensure. Let us try to identify the forms in which that violation of the rules manifested itself.
As we know, Article 199 — reference to which is in this context not only relevant but obligatory — embodies the principle of universality and not only, as the Council seems to think, that of unity: indeed it requires all the expenditure of the Community to be made the subject of estimates and then to be shown in the budget. For its part, Article 1 (1) of the Financial Regulation of 21 December 1977 (Official Journal L 356, p. 1) defines the budget as the act ‘which sets out forecasts of, and authorizes ... the expected revenue and expenditure of the Communities ... ’. From a combined reading of the two provisions it seems to me clear that there is no ‘expected’ expenditure which the budgetary authority may not take into account. In particular, it may not disregard what that regulation calls ‘expenditure arising from commitments entered into in the current financial year and/or preceding financial years’ (see third subparagraph of Article 1 (3)).
The Council, on the other hand, did disregard it by omitting, at least on the first reading, to insert the appropriations necessary to cover it. Nor are we concerned at this point to establish whether it did not do so because it wished to adhere to its code of self-discipline, which required it not to exceed the maximum rate, or for other reasons which have not emerged in the course of the proceedings. What does interest us are the omission and its significance in law. In my opinion that omission constitutes both a manifest error — as President Juncker admitted in his speeches of 9 October and 10 December — and a misuse of powers in the shape of a misuse of procedure. There can be no doubt that the interinstitutional dialogue was distorted by it and, more specifically, that the Parliament was led by it to conduct a first reading different from that which it would have given had the said appropriations been decided from the outset.
However, it is not possible to stop there. There is an episode which occurred during the last, hectic hours of the negotiations on the maximum rate which should attract the Court's attention even though the defendant is silent about it. As the Court will recall, to the Parliament's last raising of the odds which broke the 20% ceiling fixed by the Council at its second reading the latter responded with an offer under which the commitment appropriations were raised to 24.46%. The offer was, however, accompanied by a statement which the minutes of the session at which it was formulated report in the following terms: ‘Several delegations stated that the additional amounts referred to in the proposal did not meet their wishes. They none the less gave their agreement to these amounts in a desire to reach a compromise... with Parliament... [However,] it was understood that if Parliament did not also agree to the... compromise proposed, the President of the Council would be empowered to withdraw the proposal on behalf of the Council’ (PV/CONS 69, Fin. 628, Annex XIV to the Council's application).
This text, it seems to me, gives rise to two kinds of considerations. The first is of a semantic nature. To desire a compromise does not imply not exerting pressure on the other party; but it does imply allowing it a certain room for manoeuvre on the offer made to it; in other words, it entails the recognition that that party is free to put forward a higher or lower figure by way of a counterproposal. The result envisaged in making an offer which is to be taken as withdrawn if the other party rejects it, that is to say in forcing the latter to ‘take it or leave it’, cannot therefore be described as a compromise. The names usually given to it are ultimatum or diktat.
The second observation is of a legal nature. Even assuming that it had a long history of precedents behind it (which is doubtful, as the Council's Agent himself said in reply to a question put by the Court), that diktat cannot be regarded as lawful under Article 203. The parties to the dialogue arranged by that provision with a view to the agreement called for by paragraph (9) are two great representative bodies called upon to carry out a task in the public interest such as the drafting the Community budget. However brusque it may be made by the opposing interests of the parties, that dialogue must therefore take place in such a manner as to respect the lofty nature and the dignity of the purpose for which it was ordained. In plainer language, what is permissible in the business community may not be permissible for the Council and the Parliament of the European Community when they decide on its revenue and expenditure.
16.
The instances of unlawful conduct which are to be attributed to the Council in the affair before the Court are therefore two in number and one of them — the omissions in the matter of the cost of the past — is extremely serious if it is true, as the Commission remarks in presenting the preliminary draft budget for 1987, that ‘the principal feature of the European Community is that it is based on law, and so must honour its commitments. If it does not, its political and legal legitimacy will be undermined both inside and outside the Community’ (Doc. COM (86) 200, 12 May 1986, p. 2). However, and here we arrive at the real nub of the case, can it be said that the regrettable conduct of the other authority enabled the President of the Assembly to declare, albeit in the absence of an agreement on the maximum rate, that the procedure was completed and to promulgate the budget with the figures decided on at the second reading by his institution?
My answer is in the negative. The facts that I have just put forward — and, besides these, other factors such as the sincere conviction of acting in the interests of the Community or the goading by the Commission (see Christophersen's speech on 10 December) — are such as to lead any objective observer to absolve the Parliament at what Benedetto Croce might have called the ‘ethical-cum-political’ level; but with equal objectivity it must be said that they could not justify a judgment dismissing the action. The Assembly disputes this, and relies in justification of its own actions on the principle inadimplenti non est adimplendum. To this it might be replied that such a rule postulates the existence of a contract with mutual obligations whereas nothing of the kind is binding on the protagonists in the procedure regulated by Article 203 who must, if anything, conclude a ‘contract’. The case-law of the Court, however, reaches beyond this formal aspect and goes to the heart of the matter.
Thus, in its judgment of 13 November 1964 in Joined Cases 90 and 91/63 Commission v Luxembourg and Commission v Belgium the Court stated that ‘this relationship between the obligations of parties cannot be recognized under the Community law. In fact the Treaty is not limited to creating reciprocal obligations between the natural and legal persons to whom it is applicable, but establishes a new legal order which governs the powers, rights and obligations of the said persons, as well as the necessary procedures for taking cognizance of and penalizing any breach of it. Therefore, except where otherwise expressly provided, the basic concept of the Treaty requires that the Member States shall not take the law into their own hands. Therefore the fact that the Council failed to carry out its obligations cannot release the defendants from carrying out theirs’ ([1964] ECR 631: see also the judgments of 10 December 1969 in Joined Cases 6 and 11/69 Commission v France [1969] ECR 523; 13 February 1979 in Case 101/78 Granaria BV v Hoofdproduktschap voor Akkerbouwprodukten [1979] ECR 623; and the order of 21 May 1977 in Joined Cases 31/77 R and 53/77 R Commission v United Kingdom and United Kingdom v Commission [1977] ECR 921).
It is clear that these considerations, formulated by the Court with reference to the Member States, apply a fortiori to the institutions, especially when their relationship evolves, as in this case, in the context of a procedure which is regulated in all its aspects. In other words, in order to respond to the Council's unlawful conduct, the Parliament ought to have resorted to the means, such as the power of rejection, which the Article 203 places at its disposal. In considering the procedure to be completed in the absence of an agreement on the new rate, its President instead acted in breach of the requirement — to use the Court's own words — ‘not to take the law into [his] own hands’. The measure adopted by him is therefore vitiated by two defects: infringement of essential procedural requirements and infringement of the Treaty.
17.
With this conclusion, which carries with it the proposal that the said measure be annulled, it might be thought that my task is discharged. I have already said that only the President's act of declaration is open to challenge and not that mere accounting document constituted by the budget when it emerges from the last reading by the Parliament. In so saying, I have denied in principle that the Council's principal claim — for the partial annulment of the budget — is one that can be entertained by the Court. It may be, however, that the Court will not accept my view; it may even (although I rather doubt it) espouse that of the Agent for the United Kingdom who, astute lawyer that he is, became fully aware of the blunder which the applicant had made and, in a little ‘coup de theatre’ at the end of the hearing, suggested that the Court should not annul the President's act but should interpret it in such a way as to give effect to the budget to the extent to which the Assembly had lawfully adopted it. In the light of such considerations, and notwithstanding my own convictions, I shall examine the Council's claim as if it were one which the Court could entertain.
The Court is aware of the nature of this claim. The Council would like the budget to be annulled only in respect of the increases to which some items — easily identifiable and severable — are subject by reason of the amendments voted by the Assembly at its second reading. To that end it puts forward three arguments: (a) the agreement provided for in the last subparagraph of Article 203 (9) must be deemed to have been achieved because in deciding, on the basis of the majority prescribed for an increase in the rate, on the total amount of the appropriations the Assembly confirmed by implication the ceiling proposed by the Council; (b) in so far as it prevents recourse to the system of provisional twelfths, the partial annulment enables the Community to function without interruption and thus is in conformity with a principle approved by the Court, particularly in the judgment of 5 May 1981 in Case 804/79 Commission v United Kingdom [1981] ECR 1045; (c) a partial annulment can also be based on an application by analogy of Article 174. In such a case the Court would have to confer definitive effect on the budget established by the Council at its second reading.
I find none of these arguments convincing. The thesis of the implied agreement, the Court will recall, has a sorry history of petty contrivances and underhand tricks. The Council, which had conceived and elaborated it, was the principal victim of it and it is rather strange that it should now be putting it forward once again. Yet the fact remains that, at least in the present case, it does not explain but conceals the real situation. Like it or not, the Parliament voted at its second reading amendments in a total amount which exceeded the Council's offers. How, then, is it possible not to see in that vote a proposal intended to raise the percentage further? How is it possible not to realize that the effectiveness of the amendments or, if you like, of the budget taken as a whole was at that point suspended because it was subject to the Council's assent on the new rate?
The argument under point (a) is however open to another, more radical criticism. In the abstract, it is possible for there to be a presumption of an implied agreement on the part of the Council; there can be no such presumption as regards the Parliament which for its part has the power to reject the budget (Article 203 (8)). We know that in the matter which gave rise to this case it did not exercise that power and we may imagine that it did not do so because its experience of 10 crises convinced it that the 11th, too, would end with the Council giving way within the time-limit prescribed by the interinstitutional declaration or a few weeks later. It is not this, however, that counts. What does count is that the Parliament could have rejected the budget and would perhaps (we might even say, certainly) have rejected it had the pages of the future been open to it. That is sufficient, it seems to me, to exclude the possibility of reading into its actions, which moreover were always conceived in terms of attack and dominated by a spirit of ‘one-upmanship’, an intention to acquiesce in the proposals of the other party.
Let us turn to the second argument. The applicant's reference to the judgment of 5 May 1981 is of no assistance to it because the situation in that case was characterized by an absence of legislation due to the Council's inaction, a situation which a Member State had turned to its advantage in order to take action unilaterally. It was therefore a matter of condemning its conduct and this Court did so in holding that the Community must in all circumstances be able to ‘retain ... its capacity to comply with its responsibilities, subject to the observance of the essential balances intended by the Treaty’ (paragraph 23).
In the case now before the Court the situation is very different. The principle of continuity is in fact given effect by the financial provisions of the Treaty itself which provide that in the absence of a budget recourse may be had to the system of provisional twelfths. Although they are prompted by different motives, the applicant and defendant deny this and maintain that Article 204 comes into play only if ‘at the beginning of the financial year the budget has not yet been voted’. Such an argument, which turns on the mere letter of the provision, must however be firmly rejected. What is decisive, in my view, is the fact that Article 204 is placed between the article which governs the budgetary procedure and that which deals with the manner in which the budget is to be implemented. It is impossible not to infer from this arrangement that the twelfths apply at least in two other cases: if the budget has been rejected (which happened, moreover, in the case of the financial years 1980 and 1985) and if the procedure must be deemed not to have been completed because of the absence or illegality of the act of the President.
I would add that my view is not based solely on systematic considerations. It finds favour in academic legal writing (Pipkorn, ‘Legal implications of the absence of the Community budget at the beginning of the financial year’, Common Market Law Review, 1981, p. 141) and support in: (a) Article 8 of the Financial Regulation of 1977 which, in specifying the provision of the Treaty, states that the provisional mechanism is to come into operation ‘[if] the budget is not finally adopted at the beginning of the financial year’; (b) paragraph (3) of Part III of the interinstitutional declaration according to which the negotiations on the new rate may continue even after the end of the year so that ‘the budget can be adopted’ by the end of January, it being understood however that during the delay the twelfths will be applied.
These observations do not of course blind me to the fact that the provisional regime is merely a makeshift and that the various activities (for example, the new policies) will suffer the consequences. The experience of 1980 and 1985 shows however that to regard it with holy horror, as do the applicant and the Member States which have intervened in its support, is, to say the least, an exaggerated reaction. Apart from the possibility of obtaining additional twelfths, it may in fact be expected that the existing policies which fall for implementation from time to time will not be prejudiced. In particular, we know that as regards the structural Funds the Commission makes its decision in June and November: the first ‘tranche’ of commitments will therefore precede the Court's judgment and the second — can there be any doubt? —will fall due after the conclusion of the agreement. Nor is there any problem as regards payments. The time needed for the forwarding of the national dossiers and their examination by the Commission is such that the payments are as a rule cleared a few months later than provided; when the time comes for payment, the Executive will have at least two or three twelfths available to it (see Strasser, ‘Le Budget — Son environnement politique et financier — Son rejet et son etablissement — La deuxième expérience d'un régime de douzièmes provisoires’, Revue du marché commun, 1985, p. 372).
The third argument of the Council is based on the application by analogy of Article 174 and is in my view not only unfounded but extremely dangerous. As the defendant notes, a judgment upholding that argument would confer binding effects on a preparatory act which is what the draft approved by the Council at the second reading constitutes (supra, section 11). What is more serious, it would legitimize a unilateral definition of the maximum percentage where the Constitution of the Community demands agreement between the parties. In fact, therefore, the Court would be substituting itself for the Parliament and promoting itself to the rank of financial authority. It is not hard to foresee the consequences of such a judgment. The accusation of yearning for a government of judges, levelled frequently and in vain at this institution, would all at once acquire credibility. In any dispute out of the ordinary this Court's every act and word would be scrutinized with suspicion and ill will. The Community system — fragile and in greater need than others of an active judiciary, but one resolved to remain within its limits — could not run a greater risk. I am confident that the Court will avoid it; the day will come when the Council itself will be grateful to the Court for saving it from the fate of the sorcerer's apprentice.
18.
The solution which I am suggesting to the Court consists, then, in granting the Council's alternative claim for the annulment of the President's act of declaration. The Court should, however, apply by analogy the second subparagraph of Article 174 and therefore consider as definitive the commitments entered into and the payments made, on the basis of the budget promulgated by the President, before the delivery of its judgment. It scarcely needs to be remarked that this request does not in any way contradict the points suggested to me by the Council's last argument. The request is made necessary by the indispensable requirements of certainty. The promulgation of the budget, although unlawful, has already had a vast series of direct and indirect effects: to cancel them out, to nullify the rights acquired by so many parties would give rise to a situation more serious than the actual survival of the contested act.
For the purposes of Article 176, it will be for the Parliament, as the body whose act has been declared void, to take the necessary measures to comply with the judgment, taking into account, of course, the fact that Article 203 (9) requires it to come to an agreement with the Council. In that respect, and in contrast with what is stated by the defendant's lawyers, I am convinced that it will not be necessary to carry out the entire procedure afresh. From the legal point of view at least, there is nothing to stop the procedure from being resumed from the time — the Assembly's second reading — at which, as a consequence of the Court's judgment, it will be necessary to deem it as having been interrupted.
19.
Mr President, Members of the Court, I have devoted the first part of this Opinion to describing the parties' conduct between 1974 and 1985 and then a long paragraph to the facts in this case. The lessons which may be drawn from that survey do not augur well for the future. On the contrary, the poor drafting of the provision which governs the budgetary procedure and the conflicting political objectives of the two institutions invite the conclusion that, even if the Court's judgment does not have the effect of exacerbating their relations, it will have very little impact on them. I will hazard a forecast: next year, perhaps even this year, the conflict which has always divided the Council and the Parliament will flare up again in similar or even identical form.
Without condemning that conflict — which is not abnormal since it is an expression of the provisional nature of the institutional balances on which the life of the Community is based — it is therefore necessary for a dedicated search to be made for means and devices capable of rendering it less of an everyday event, less disruptive and above all less likely to find its outlet in proceedings before this Court. Whilst I do not think that internal codes of self-discipline are of any use for that purpose, I consider that the inquiry I have mentioned may be able to count on a valid point of departure: the interinstitutional declaration of 1982.
It will be said that such a document has yielded beneficial results for too short a period; and that is true. It is true, however, as I believe, because the document has a weak point in the poor degree, or rather the total lack, of effectiveness of the authority, even though it is a crucial one, provided for in paragraphs (3) to (5) of Part II and in paragraph (5) of Part III. One does not have to be an expert in political science to realize that a mediatory and conciliatory body composed of the Presidents of the very parties to the dispute (the President of the Commission must also be regarded as such) is by virtue of its nature extremely ill-adapted to the tasks of mediation and conciliation. There must therefore be added to it a personality who from the institutional point of view has nothing to do with the budgetary procedure but is so credible and authoritative as to be able, being listened to, to invite the duellists to lay down their arms and take his advice. Might that personality not be the President of the Court? I do no more than pose the question and explain that this is less bold than it might appear: the President of this Court was in fact a member of a similar authority set up under Article 78 (3) of the ECSC Treaty which has now been abrogated.
20.
Having now arrived, with these considerations, which may perhaps be of some value, at the end of my task, I propose that the Court should, in its decision on the action brought by the Council of the European Communities against the European Parliament, by an application lodged at the Court Registry on 11 February 1986, hold that:
The act of 18 December 1985 whereby the President of the Parliament declared the final adoption of the general budget for 1986 is void. The commitments entered into and the payments made prior to the present judgment are considered as definitive.
The novelty and complexity of the issues dealt with lead me to ask the Court to order the parties to bear their own costs.
(
*1
)	Translated from the Italian.