Opinion of Mr Advocate General Jacobs delivered on 17 October 1991. - Council of the European Communities v European Parliament. - Budgetary procedure - Amending and supplementary budget - Carry-over of revenue - Budgetary balance. - Case C-284/90.



European Court reports 1992 Page I-02277



Opinion of the Advocate-General

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My Lords,

1. The phenomenon which has given rise to these proceedings is an exceptional one: they arise from the unusual event of a surplus, rather than a deficit, in the Community' s accounts. Perhaps even more surprisingly, the surplus has not caused universal satisfaction, thus casting doubt on the view of Mr Micawber (Charles Dickens, David Copperfield, Chapter XII) that "Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness". The Council is dissatisfied with the European Parliament' s treatment of the somewhat larger surplus generated on the Community' s accounts in 1989; it also seeks to have resolved a long-standing dispute over whether the Parliament has any powers over the Community' s revenues, or whether its powers are essentially confined, as the Council maintains, to the area of non-compulsory expenditure.

2. In this case, the Council challenges the adoption by the Parliament of the amending and supplementary budget No 2 for 1990 ("budget rectificatif et supplémentaire", hereafter "BRS No 2"). It does so on two grounds. First, it contends that the Parliament acted unlawfully in adopting a budget in which the entire surplus arising from the financial year 1989 was not carried forward to 1990, as required by Article 7 of the "Own Resources Decision" (Council Decision 88/376/EEC, Euratom of 24 June 1988, Official Journal 1988 L 185, p.24) and Article 32 of the Financial Regulation of 21 December 1977, as amended by Article 1, point 38 of Council Regulation No 610/90 of 13 March 1990, (Official Journal 1990 L 70, p. 1). Secondly, the Council contends that, under the second subparagraph of Article 203(4) of the EEC Treaty, the Parliament has no power to amend budgetary provisions relating to revenue, as opposed to non-compulsory expenditure, whereas it purported to make such amendments in the case of Articles 130, 140 and 300 of BRS No 2.

3. The budget for the financial year 1990 consisted of the general budget of the European Communities (Official Journal 1990 L 24, p. 3), together with a total of three amending and supplementary budgets, of which the budget challenged in these proceedings is the second. The President of the Parliament declared BRS No 2 finally adopted on 11 July 1990, and it was published in the Official Journal on 3 September 1990 (Official Journal 1990 L 239, p. 1). The Council was notified of the adoption of BRS No 2 by a letter of the President dated 12 July 1990 and received at the General Secretariat of the Council on 16 July 1990. By an application dated 15 September 1990 and registered at the Court on 17 September 1990, the Council requests the Court to:

(1) annul BRS No 2, adopted by the Parliament on 11 July 1990, as published in the Official Journal;

(2) annul the act of the President of the Parliament declaring that BRS No 2 was finally adopted, and

(3) declare that the annulment of neither act calls into question the validity of payments made or commitments entered into, or of own resources called up or levied, before the close of the financial year 1990.

The Commission has intervened in support of the Parliament.

The system of the Communities' own resources

4. Before discussing the issues dividing the parties, I will outline the system of the Communities' own resources, first introduced by Council Decision 70/243 of 21 April 1970 (Official Journal, English Special Edition 1970(I), p. 224). The 1970 decision was replaced by Council Decision 85/257 of 7 May 1985 (Official Journal 1985 L 128, p. 15), which was in turn replaced by the current Own Resources Decision of 1988 (cited above in paragraph 2). In what follows, I shall refer to the current decision as the "Own Resources Decision" or as the "1988 Decision", and to its predecessors as the "1970 Decision" and the "1985 Decision" respectively.

5. The 1970 Decision and the 1985 Decision are based upon Article 201 of the EEC Treaty and Article 173 of the Euratom Treaty, and the 1988 Decision is based upon Articles 199 and 201 of the EEC Treaty and upon Articles 171 and 173 of the Euratom Treaty. I shall refer henceforth exclusively to the EEC provisions. Article 200 of the EEC Treaty provides for budget revenue to include financial contributions of Member States, apportioned according to a scale laid down in that article. Article 201 provides however for the Commission to submit proposals to the Council on the replacement of such financial contributions by the Community' s own resources. According to the third paragraph of Article 201:

"After consulting the European Parliament on these proposals the Council may, acting unanimously, lay down the appropriate provisions, which it shall recommend to the Member States for adoption in accordance with their respective constitutional requirements."

Thus, the three Own Resources decisions have the peculiarity of not being binding until ratified by the Member States. In each case the decisions were duly ratified.

6. Article 199 of the Treaty, first paragraph, provides that all items of revenue and expenditure of the Community shall be included in estimates to be drawn up for each financial year, and shall be shown in the budget. The second paragraph of Article 199 provides that:

"The revenue and expenditure shown in the budget shall be in balance."

7. According to Article 2(1) of the 1988 Decision, the budget of the Communities is financed, inter alia, from four resources, each of which is regarded as the Communities' own resources (as distinct from financial contributions by the Member States):

(a) levies, premiums etc. established within the framework of the Common Agricultural Policy ("agricultural levies");

(b) Common Customs Tariff duties and other duties on trade with non-member countries ("customs duties");

(c) the application of a uniform rate valid for all Member States to the VAT assessment base of each Member State, the latter not exceeding 55% of the Member State' s GNP ("VAT resources");

(d) the application of a rate, determined under the budgetary procedure, to the GNP of the Member States ("GNP resources").

By Article 3(1) of the 1988 Decision, the total amount of own resources may not exceed 1.2% of the total GNP of the Community (and, for the years 1988 to 1992, may not exceed certain specified percentages).

8. It is to be noted that under the Own Resources decisions of 1970 and 1985, it was the rate of VAT resources, rather than of GNP resources, which was to be adjusted in the course of the budgetary procedure in order to balance the Community budget, up to a maximum rate of respectively 1% and 1.4%. This is because the category of GNP resources did not exist before it was introduced by the 1988 Decision. Thus, the rôle played by the VAT resources in the earlier decisions was taken over, in 1988, by the new "fourth" resource based on GNP. This latter resource was introduced to avoid a further increase in the maximum rate of VAT resources beyond the 1.4% introduced by the 1985 Decision.

9. The 1988 Decision also makes provision for a correction in favour of the United Kingdom, in order to compensate for certain budgetary imbalances. The correction is made by reducing the amount of VAT resources paid by the United Kingdom, and is financed by increasing the amounts paid by the other Member States according to a formula related to their respective GNPs. The amount paid by each Member State is determined in two stages. First, a uniform rate of VAT resources is determined in accordance with Article 2(4), which provides that:

"The uniform rate ... shall correspond to the rate resulting from:

(a) the application of 1.4% to the VAT assessment base for the Member States, and

(b) the deduction of the gross amount of the reference compensation referred to in Article 4(2)..."

where the reference compensation is an amount corresponding to the correction in favour of the United Kingdom. It is to be noted that, ostensibly at least, the figure of 1.4% is fixed, and not a ceiling as in the 1985 Decision. The cost of the correction is then borne by the other Member States, in accordance with Article 5(1), by reference to each Member State' s share of GNP resources payments (reduced by one third in the case of Germany). Thus, in the second stage of the calculation, the amount borne by each Member State is added to its payment of VAT resources up to a ceiling of 1.4%, above which it is added to its payment of GNP resources (see Article 5(2) ).

10. As we have seen, the rate of GNP resources is fixed in the course of the budgetary procedure for each financial year, and is set at an amount which will allow estimated revenue to cover estimated expenditure for that year. Since actual expenditure may fall short of estimated expenditure in a given year, or the total revenue from own resources may exceed projections, there may be a surplus of revenue over expenditure at the end of a financial year. Article 7, first sentence, of the 1988 Decision accordingly provides that:

"Any surplus of the Communities' revenue over total actual expenditure during a financial year shall be carried over to the following financial year."

Similarly, the first paragraph of Article 32 of the Financial Regulation provides that:

"The balance from each financial year shall be entered in the budget for the following financial year as revenue in the case of a surplus or expenditure in the case of a deficit."

The surplus from 1989

11. The present case concerns the fate of just such a budgetary surplus. As a result of economies achieved in the financial year 1989, a surplus of some ECU 5 000 million from that year remained after the close of accounts. A portion of the surplus was entered in the general budget for 1990, leaving the remainder to be dealt with in amending and supplementary budgets for the same year. In its preliminary draft of BRS No 2, the Commission did not however propose to enter the entire remaining surplus as revenue in 1990. Instead, part only was entered, leaving a further remainder of some ECU 880 million (later adjusted to ECU 780 million). It was envisaged that part of the latter sum would be entered in a third amending and supplementary budget for 1990, leaving a final residue to be entered as revenue in the budget for 1991.

12. The Commission was conscious that its proposed method of dealing with the 1989 surplus did not respect the literal terms of Article 32 of the Financial Regulation, which, as will be recalled, provides that any surplus for a given financial year shall be entered as revenue in the budget for "the following financial year". It will also be recalled that Article 7 of the Own Resources Decision is in similar terms. In the view of the Commission, however, the method it proposed was the lesser of two evils, the greater evil being that of a budget which did not balance. For, if the approach of the Commission were followed, just enough of the surplus from 1989 could be entered as revenue for the year 1990 to ensure that the rate of GNP resources could be set at zero. If any greater amount of the surplus were entered, however, the result would be an excess of estimated revenue over estimated expenditure for 1990. The additional amount could not be used to reduce the uniform rate of VAT resources, because the Commission took the view that the latter was fixed at 1.4%, less an amount corresponding to the United Kingdom correction (see above, paragraph 9). Thus, if all the 1989 surplus were entered as revenue for 1990, the result would be a budget in which revenue and expenditure did not balance, contrary to Article 199 of the Treaty.

13. By virtue of Article 15(2) of the Financial Regulation, as amended by Article 1, point 20 of Council Regulation No 610/90, the budgetary procedure as set out in Article 203 of the Treaty is applicable (mutatis mutandis) to amending and supplementary budgets. The Commission' s preliminary draft of BRS No 2 was accordingly placed before the Council under Article 203(3), first subparagraph, of the Treaty. In establishing its draft under Article 203(3), third subparagraph, however, the Council did not follow the Commission' s proposal for dealing with the surplus from 1989. In the view of the Council, Article 7 of the 1988 Decision and Article 32 of the Financial Regulation compelled it to enter the entire amount of the 1989 surplus as revenue for the financial year 1990. As a result, a lower rate of VAT resources was required than the amount specified in Article 2(4) of the 1988 Decision. In the view of the Council, however, the lesser evil was to depart from the literal meaning of Article 2(4) of the Own Resources Decision, rather than from Article 7 of the decision and Article 32 of the Financial Regulation.

14. When the Council' s draft budget was placed before the Parliament under Article 203(4), first subparagraph, of the Treaty, the Parliament preferred the Commission' s approach to that of the Council. The Parliament accordingly purported to amend the draft budget pursuant to the second subparagraph of Article 203(4), so as to restore the Commission' s original proposal for dealing with the surplus. At the next stage of the budgetary procedure, however, the Council exercised its power of modification under Article 203(5)(a) by rejecting the Parliament' s amendments, while contesting its power to make any amendments to the revenue provisions of the budget. The Parliament, in its turn, restored the disputed amendments, acting pursuant to Article 203(6) of the Treaty, and proceeded to adopt BRS No 2 accordingly. The President of the Parliament then declared, pursuant to Article 203(7), that BRS No 2 had been finally adopted.

15. As I have already mentioned, both the adoption of the budget and the President' s declaration that it has been adopted are challenged by the Council in these proceedings, although the grounds of annulment are in each case the same. In its defence, the Parliament contests each of those grounds, and raises in addition two objections of admissibility. Since the latter objections concern the form of the order sought by the Council, rather than the admissibility of the application as a whole, I shall deal with the Council' s grounds of annulment first, and only then turn to the issues of admissibility. Reversing what is perhaps the logical order, I shall consider the grounds of annulment in the order in which they are treated in the Council' s application; thus, I shall first consider the issue of the legality of the specific amendments made by the Parliament, and then the question of the Parliament' s general right to amend revenue provisions of the budget.

The lawfulness of the Parliament' s amendments

16. According to the Council' s first ground of annulment, the version of BRS No 2 resulting from the Parliament' s amendments is contrary to Article 7 of the Own Resources Decision and Article 32 of the Financial Regulation, as well as to the general budgetary principle of "annuality", that is to say the principle that budgetary provisions are related to a particular financial year. Although the Council, in paragraph 25 of its application, claims that the Parliament has in consequence infringed an "essential procedural requirement" within the meaning of the first paragraph of Article 173 of the Treaty, I think it would be more accurate to characterize the alleged infringement as one of "this Treaty or of any rule relating to its application" within the meaning of the same provision.

17. The three amendments contested by the Council are: (1) an amendment to Article 130 of the draft budget, relating to the amount of VAT resources; (2) an amendment to Article 140, relating to the amount of GNP resources; and (3) an amendment to Article 300, relating to the amount of surplus from 1989 entered as revenue for the financial year 1990. Since the second of the three amendments is consequential upon the other two, and results from an application of the special rules apportioning the cost of the United Kingdom correction, I shall discuss amendments (1) and (3) first, before turning to (2).

(a) The amount of VAT resources and the treatment of the surplus from 1989

18. In Article 130 of the version of BRS No 2 finally adopted by the Parliament, an amount of VAT resources was raised which corresponds to a uniform VAT rate of 1.2557%, which was the figure obtained by starting with the maximum figure of 1.4% and then subtracting an amount corresponding to the United Kingdom correction. Before it was amended by the Parliament, the Council' s draft called up an amount corresponding to a rate of only 1.2159%. The effect of the Parliament' s amendment was to increase the total amount of VAT resources called up by an amount of ECU 806 886 150.

19. Article 300 of BRS No 2 enters, as revenue for 1990, a part only of the surplus still remaining from the preceding financial year. As we have already seen, the reduction in the amount of surplus entered, as compared with the figure in the Council' s draft, reflects the fact that as a result of the Parliament' s amendment to Article 130, more revenue would be available than was necessary to balance the budget for 1990. Thus, the amendment to Article 300 avoids the budgetary imbalance which would otherwise result from the amendment to Article 130.

20. It will be recalled that three budgetary rules, each apparently mandatory, could not be satisfied simultaneously in the financial year 1990:

(1) the rule that the surplus from a given year must be entered as revenue in the following financial year (Article 7 of the Own Resources Decision and Article 32 of the Financial Regulation);

(2) the rule that the uniform rate of VAT resources paid by the Member States is calculated according to the formula laid down by Article 2(4) of the Own Resources Decision, which is based upon a starting figure of 1.4% ("the 1.4% rule");

(3) the rule that revenue and expenditure shown in the budget shall be in balance (Article 199 of the Treaty).

21. According to the Council, Article 7 of the Own Resources Decision and Article 32 of the Financial Regulation require the entire amount of the surplus for 1989 to be carried over to 1990. The relevant provisions do not allow any choice as to how much of the surplus should be carried forward to the following year. Given that the budget must balance (principle (3) above), the consequence must be that a lower uniform rate of VAT resources is set than the rate which would otherwise apply under principle (2). The 1.4% rule in Article 2(4) of the Own Resources Decision is therefore not inviolable: if it comes into conflict with the other two principles, it is the one which must yield.

22. For the Parliament and the Commission, on the other hand, the conflict is to be resolved in favour of the 1.4% rule, rather than in favour of the rule governing the treatment of the surplus (although all parties are agreed that the rule laid down in Article 199 of the Treaty must be respected). The Commission, in particular, suggests that the rule governing the surplus is of a lesser importance, given its "more technical" character. In contrast, any adjustment to the figure of 1.4% would be incompatible with the concept of "own resources" of the Communities. Once the figure of 1.4% has been fixed by Council decision, it is argued that any reduction in that figure would entail reimbursing the Member States sums to which the Community has already become entitled, thereby violating the principle that "own resources" are resources of the Communities, and not financial contributions which can be returned, if necessary, to the Member States.

23. It seems to me however that the latter argument assumes what it is trying to prove. If the figure of 1.4% were indeed immutable, there could of course be no question of returning any of the resulting VAT resources to the Member States, since the Communities' own resources, once definitively called up, belong by definition to the Communities. The question however is precisely whether, on a true interpretation of the Own Resources Decision, the figure of 1.4% is indeed immutable, or whether it can, at least in exceptional circumstances, be adjusted in the course of the budgetary procedure. As the Council pointed out at the hearing, it is misleading to refer to such an adjustment as a "reimbursement" of funds to the Member States, as if the level of VAT resources set in the Commission' s proposal had already been transferred from the Member States to the Communities. The question at issue is not whether VAT resources called up in the 1990 budget should be returned to the Member States, but rather what amount of such resources should be called up given the expenditure needs for that year. Similarly, it does not seem to me to be helpful to classify the rule that a surplus may not be carried over to more than one subsequent year as merely "technical". Indeed, given the fundamental character of the principle of "annuality", of which that rule is one expression, the appropriateness of the label may be questioned. At the very least, it would seem that Article 7 of the Own Resources Decision ranks equally with Article 2(4). Our task, in any case, is to interpret that decision in the light of its origin, wording and purpose. It will then appear that there is in fact no conflict between the Own Resources Decision, properly construed, and the rule for the treatment of the surplus.

24. I turn therefore to the interpretation of the Own Resources Decision. I share the Parliament' s view that the interpretation of the 1988 Decision is assisted by a consideration of its predecessor decisions of 1970 and 1985 (cited above in paragraph 4).

25. It will be recalled that the 1970 Decision was the first decision taken pursuant to Article 201 of the Treaty, for the purpose of replacing a system of financial contributions with a system of own resources. The 1970 Decision introduced the new system in two stages: Article 2 introduced an "agricultural levies" resource and a "customs duties" resource, with effect from 1 January 1971; Article 4(1) then introduced a further resource, effective from 1 January 1975, to be obtained by applying a rate not exceeding 1% to the VAT assessment base of the Member States (Article 4(1), second subparagraph). The final introduction of this VAT resource had however to await the rules determining the uniform assessment base, and in the event did not take place until the 1980 financial year. In the mean time, interim arrangements for financial contributions from the Member States were provided by Article 4(2) and (3).

26. Article 4(5) of the 1970 Decision provides that:

"From the complete application of the second subparagraph of paragraph 1, any surplus of the Communities' own resources over and above the actual expenditure during a financial year shall be carried over to the following financial year."

It will be recalled that the "complete application" of the second subparagraph of Article 4(1) was to occur only when the VAT assessment base for all the Member States had finally been determined. Thus, the rule for the carrying over of the surplus laid down in Article 4(5) is stated to apply from the date when the new system, including the VAT resources, was finally in place.

27. What conclusions should be drawn from the fact that the rule for the carrying over of the surplus, introduced for the first time by Article 4(5) of the 1970 Decision, is stated to apply from the date of the full introduction of the VAT resource? There are, it seems to me, two possibilities. The first possibility is that, before the complete application of the second subparagraph of Article 4(1), a surplus is not carried over to the next financial year, but rather returned to the Member States. The justification for such a result would be that before the complete introduction of the VAT resource, the Community budget is still financed in part by means of financial contributions rather than by true "own resources": see Article 4(2) and (3). There is however a contrary argument. For it is to be observed that Article 4(2) and (3) are each expressed to be "by way of derogation from the second subparagraph of paragraph 1" (my emphasis), and not from the first subparagraph. The first subparagraph however provides that:

"From 1 January 1975 the budget of the Communities shall, irrespective of other revenue, be financed entirely from the Communities' own resources."

Thus, it appears that Article 4(2) and (3) are not intended to derogate from that requirement (cf. Sacchettini in Mégret (ed.), Le Droit de la CEE Vol. 11 (Brussels 1982), page 25). If the financial contributions referred to in Article 4(2) and (3) are indeed to be regarded as Communities' own resources, any surplus arising from such contributions should not be returnable to the Member States.

28. The second possible interpretation of Article 4(5) is therefore that the rule for the carrying over of the surplus was to be applied even before the complete introduction of the VAT resource. As we have seen, that conclusion would be based on the argument that, even before the VAT resource has been finally introduced, the revenue raised for the financing of the Community budget should be regarded as Communities' own resources.

29. In its defence, however, the Parliament appears to suggest a third possible interpretation of Article 4(5), and one which the Parliament considers to have important consequences for the interpretation of the subsequent Own Resources decisions. On the Parliament' s interpretation, the rule for the carrying over of the surplus in Article 4(5) applies uniquely to the VAT resource, to which it is "specially dedicated". It follows, according to the Parliament, that the rule "concerns" only the residual resource called upon to balance the Community budget - that is to say, the VAT resource in the 1970 and 1985 Decisions, and the GNP resource in the 1988 Decision. The Parliament appears to conclude, therefore, that only so much of the surplus can be carried over as can be set off against the residual resource. The maximum amount of the surplus from 1989 which can be carried over to 1990 is consequently the amount required to reduce the rate of GNP resources to zero.

30. In my view, the Parliament' s interpretation cannot be accepted. Although, as we have seen, the introductory wording of Article 4(5) of the 1970 Decision gives rise to a certain degree of ambiguity, it seems to me that it is clear, in any case, that once the VAT resources have been fully introduced (in the event, from the financial year 1980), the rule for the carrying over of the surplus is to be applied without qualification. Thus, Article 4(5) refers in general terms to "any surplus of the Communities' own resources", and is not limited to any particular kind of resources, or to any specific amount of surplus. The corresponding article of the 1985 Decision (Article 6) is in similarly general terms, and for obvious reasons does not contain the ambiguity arising from the delay in introducing the VAT resources (since that had already been achieved by 1985).

31. It is true that both the 1970 Decision and the 1985 Decision are based upon the premise that it will be necessary to call upon the VAT resources in any given year in order to balance the Community budget. To that extent, it is true that both decisions envisage that if any surplus arises, it will be because there has been an overestimation in the rate of VAT resources, just as the 1988 Decision envisages that any surplus would arise from an overestimation in the rate of GNP resources. In my view, however, that observation does not support the Parliament' s conclusion. On the contrary, once it is appreciated that all three Own Resources decisions are based upon the hypothesis that there is an insufficiency of revenue, which it is the purpose of the decision in question to remedy, it will be seen that caution is required when the decision is applied to circumstances where there is an excess.

32. In principle, a potential excess of revenue over expenditure need not only arise when there is a surplus to be carried over from the preceding year. An excess could arise independently of any preceding surplus, for instance if expenditure estimates for a given financial year were abnormally low. On the Parliament' s interpretation of Article 2(4) of the decision, it would still be necessary to call up the full rate of VAT resources (based on a starting figure of 1.4%), even when it was known that doing so would lead to an excess of revenue over expenditure, that is to say to a violation of Article 199 of the Treaty. An examination of the three Own Resources decisions shows, in my opinion, that such an interpretation is untenable, and it is to be noted that such a conclusion can be reached even without reliance upon Article 7 of the 1988 Decision.

33. Thus, the fifth recital to the 1970 Decision refers expressly to the fact that revenue from the first two categories of resources (namely, agricultural levies and customs duties) will be insufficient to meet Community expenditure. Similarly, the 1985 Decision increases the maximum VAT rate from 1% to 1.4% "in order to augment own resources" (second recital), and it too is therefore based upon the assumption that revenue from existing resources will be insufficient.

34. When the 1985 Decision was replaced by the 1988 Decision, the 1.4% limit on the rate of VAT resources had itself been found to be insufficient. The 1988 Decision accordingly introduced a new or "fourth" category of resource, obtained by applying a uniform rate to GNP. The Parliament is of course correct in saying that the new resources take over the role of "residual" category, adjustable according to the need to balance Community revenue and expenditure. The reason the VAT resources are not a residual category in the context of the 1988 Decision, however, is that the decision assumes that a rate of 1.4% will not be adequate to cover Community expenditure.

35. Like its predecessors, therefore, the 1988 Decision is founded upon the premise that the existing means of financing the Community budget require supplementation. Thus, the second recital to the 1988 Decision declares that "the resources available within the limit of 1.4% are no longer sufficient to cover the estimates of Community expenditure". The fourth recital declares:

"Whereas the Community must possess stable and guaranteed revenue enabling it to stabilize the present situation and operate the common policies; whereas this revenue must be based on the expenditure deemed necessary to this end...".

It is in the context of those assumptions that the 1988 Decision makes no provision for the rate of VAT resources to be adjusted in the course of the budgetary procedure. Given that even a rate of 1.4% was likely to be insufficient to balance the Community budget, there appeared to be no need to make provision for the rate to be adjusted.

36. Thus, neither the Community legislator when it adopted the 1988 Decision, nor the Member States when they ratified the decision, can be said to have contemplated the possibility that the rate of 1.4% might be more than sufficient in a given year. There is therefore no cause to impute to the authors of the decision an intention to derogate from the fundamental principle, enshrined in the Treaty, that revenue and expenditure shown in the budget must balance. Indeed, given that Article 199 of the Treaty is cited as a legal basis for the decision, it must be assumed that they did not intend to derogate from that principle, even supposing such a derogation were possible. Moreover, as the fourth recital to the decision makes clear, the decision is founded on the principle that revenue is to be based on necessary expenditure, and the principle that revenue and expenditure must balance is also mentioned in Article 203(10) of the Treaty.

37. Once the 1988 Decision is construed in the light of the principle that revenue and expenditure must balance, it can be seen that the figure of 1.4% referred to in Article 2(4) of the decision is a figure which may be adjusted in the course of the budgetary procedure, whenever it is necessary to do so in order to prevent an excess of revenue arising. The figure can be adjusted, in particular, where the potential excess arises from an application of Article 7 of the Own Resources Decision.

38. There can therefore be no obstacle to entering the full amount of the surplus from 1989 in an amending or supplementary budget for 1990, in accordance with Article 7 of the Own Resources Decision and Article 32 of the Financial Regulation. The uniform rate of VAT resources can then be reduced so as to ensure that no more revenue is raised than is judged necessary to cover estimated expenditure.

39. It follows, in my view, that Article 130 and Article 300 of BRS No 2 are each invalid. Article 300 is invalid because it violates Article 7 of the Own Resources Decision and Article 32 of the Financial Regulation. Article 130 is invalid because it provides for the calling up of an amount of VAT resources which would violate Article 199 of the Treaty.

(b) The amendment relating to the GNP resources

40. In the Council' s draft of Article 140 of BRS No 2, the total amount of GNP resources called up was set at zero. As a result of the Parliament' s amendment, however, which restores the original proposal of the Commission, GNP resources to a total amount of ECU 94,602,333 are called up. The commentary to Article 140 explains that "The gross national product based own resources are called up only in connection with the financial compensation for the United Kingdom."

41. It might at first sight seem surprising that it was considered necessary to raise any amount of GNP resources in BRS No 2. On the Commission' s own estimation, some ECU 780 million still remained of the surplus from 1989: why then was it necessary to ask the Member States to pay a further amount of nearly ECU 95 million, given that the Community already had sufficient funds? As the parties explained, however, in response to a written question of the Court, their respective positions on the GNP resources were merely the logical consequences of the positions adopted on the uniform rate of VAT resources.

42. It is to be noted that the amount raised by way of GNP resources in BRS No 2 is not the result of the application of a rate "determined under the budgetary procedure in the light of the total of all other revenue", pursuant to Article 2(1)(d) of the Own Resources Decision. The amount results rather from an application of Article 5(2), which provides for the financing of the correction in favour of the United Kingdom.

43. As we have already seen (at paragraph 9 above), the correction in favour of the United Kingdom is borne by the other Member States in proportion to their respective GNPs. If 1.4% is taken as the starting point for the calculation of the rate of VAT resources, the amount paid by a given Member State is determined, in the first place, by deducting from 1.4% an amount corresponding to the compensation to be paid to the United Kingdom: the resulting figure is the uniform rate of VAT resources (which the Parliament set at 1.2557%). The next step is to add back on a second amount, calculated separately for each Member State as a function of its GNP. To the extent that the resulting figure is greater than 1.4%, the excess amount must be called up under the heading of GNP resources, since the maximum VAT rate is set at 1.4%. If, on the other hand, a starting figure of less than 1.4% is chosen, leading to a correspondingly lower uniform VAT rate, the cost of the United Kingdom correction can be met in this instance without GNP resources being called up from any Member State. The second solution is the one chosen by the Council, which as we have seen proposed a uniform VAT rate of only 1.2159%.

44. Since the Parliament took the view that no adjustment could be made to the figure of 1.4% specified in Article 2(4) of the Own Resources Decision, it had no choice but to adopt the first of the above two approaches, with the consequence that an amount of GNP resources was called up from four of the Member States pursuant to Article 5(2). The Council, as we have seen, was able to avoid calling up GNP resources from any Member State. Since I have already reached the conclusion that the Council' s approach is to be preferred, it follows that no amount of GNP resources need be raised. Thus, the invalidity of Article 140 of BRS No 2 follows from the invalidity of Article 130.

45. It seems to me, moreover, that the fact that the Parliament' s interpretation of the Own Resources Decision leads to the raising of GNP resources from four of the Member States is an additional reason for rejecting that interpretation. For, as I have already observed, the result is that resources are called up, notwithstanding the fact that more revenue is already available than is necessary to finance both estimated Community expenditure and the costs of the United Kingdom correction. In my view, it is unlikely that such a paradoxical result can have been intended, either by the Community legislator when it adopted the Own Resources Decision, or by the Member States when they ratified that decision in accordance with Article 201 of the Treaty.

46. Finally, I must consider a further argument put forward by the Parliament, which if successful would show that the Council is not entitled to object to the Parliament' s amendments, even if the above conclusions are correct.

47. The Parliament argues that, even if the entire amount of the surplus from 1989 is required to be entered in an amending or supplementary budget for 1990, the Council is not entitled to insist that it be entered in BRS No 2. The Parliament points out that BRS No 2 was not the last amending or supplementary budget for 1990. A third such budget was envisaged at the time of the adoption of BRS No 2, and a BRS No 3 was accordingly adopted on 12 December 1990 (Official Journal 1990 L 381, p. 1). Thus, at the time of the adoption of BRS No 2, the possibility still existed that some or all of the remaining surplus would be dealt with in the financial year 1990.

48. From Article 300 of BRS No 3, it can be seen that a further portion of the surplus from 1989 amounting to ECU 164 184 346 is entered, bringing the amount of surplus carried over to a total of ECU 3 645 156 464. Thus, even when the sum of ECU 819 million transferred to the EAGGF reserve is taken into account, it can be seen that the three amending and supplementary budgets for 1990 fail to deal with the entire remaining surplus from 1989. Of a total surplus of ECU 5 080 million, only ECU 4 464 156 464 is entered in 1990 (see BRS No 3, Official Journal 1990 L 381, pp. 6 to 7).

49. Indeed, at the time of the adoption of BRS No2, it was clear to all concerned that the Commission and the Parliament proposed to enter surplus from 1989 as revenue for 1990 only to the extent that such revenue was required to meet expenditure for 1990. It is clear, therefore, that it is only from the point of view of the Commission and the Parliament that the Council' s application can be said to be premature. For it is only if one considers that the amount of surplus to be carried over is a variable item, adjustable according to the expenditure needs of the current financial year, that the Parliament' s argument has any force. If, on the other hand, one accepts the position of the Council, according to which the entire amount must of necessity be carried over, there can be no reason for not entering the entire amount of the surplus as soon as it is ascertained. Since I have already concluded that the Council' s approach is to be preferred, my conclusions cannot be affected by the Parliament' s further argument.

50. In my opinion, therefore, Articles 130, 140 and 300 of BRS No 2 are each defective, and hence BRS No 2 could not validly be adopted by the Parliament.

The scope of the Parliament' s power to amend

51. Given that I have reached the conclusion that, even if the Parliament has a power to amend the revenue provisions of the budget, the power was exercised unlawfully in the present instance, it is not strictly necessary to consider the Council' s second ground of annulment. Since however the scope of the Parliament' s power of amendment is a question of general interest and importance, I shall also consider that second issue.

52. Article 203(3), third subparagraph, of the Treaty provides that the Council shall establish the draft budget, and Article 203(4), second subparagraph, provides that:

"The European Parliament shall have the right to amend the draft budget, acting by a majority of its members, and to propose to the Council, acting by an absolute majority of the votes cast, modifications to the draft budget relating to expenditure necessarily resulting from this Treaty or from acts adopted in accordance therewith."

53. It is clear that the right to amend the draft budget is subject to the qualification that, in the case of provisions of the budget relating to compulsory expenditure, the Parliament merely has the power to propose modifications. Such modifications may be rejected by the Council under point (b) of the first subparagraph of Article 203(5). In the case of amendments, on the other hand, modifications to them made by the Council under point (a) of that subparagraph may be amended or rejected by the Parliament under Article 203(6). Thus, in the case of amendments, the Parliament and not the Council has the "last word".

54. The terms of the power of amendment given by Article 203(4), second subparagraph, do not appear to be subject to any further limitation, beyond that implied by the Council' s powers over compulsory expenditure. It is however sometimes assumed that the Parliament' s power of amendment is limited to expenditure provisions of the budget. Thus, just as the power to propose modifications under the second subparagraph of Article 203(4) relates to items of compulsory expenditure, it is assumed that the power to amend must also relate to expenditure provisions, and must hence be limited to items of non-compulsory expenditure: see the Opinion of Advocate General Mancini in Case 34/86 Council v Parliament [1986] ECR 2155, at p. 2159, and see also A.G. Toth, The Oxford Encyclopaedia of European Community Law, Volume I (Oxford 1990), p. 90, and Magiera in Grabitz (ed.), Kommentar zum EWG-Vertrag (Munich 1983) Art. 203, paragraph 11. It seems to me however that such an assumption is by no means self-evident.

55. In support of its contention that the Parliament' s power of amendment relates solely to non-compulsory expenditure, the Council argues as follows. First, the Community budget is a "budget de dépenses", that is to say it is based on the need to finance projected Community expenditure. Article 203 of the Treaty accordingly lays down precise rules which govern the role of each institution in the determination of expenditure, giving Parliament the last word on the level of non-compulsory expenditure in the same way that the Council is given the final say in regard to items of compulsory expenditure. As far as Community revenue is concerned, on the other hand, Article 203 is silent on any procedures to be followed. According to the Council, the reason the Treaty provides no special mechanism for amendments to revenue is that no such mechanism is necessary. The raising of Community revenue is strictly governed by the Own Resources Decision, which leaves no room for manoeuvre and no margin of appraisal. Although, as the Council concedes in its reply, the Parliament' s power to amend the statement of non-compulsory expenditure must at least entail a power to make consequential amendments to the statement of revenue, those are the limits of the Parliament' s powers. It would, says the Council, be illogical to allow the Council the last word in the determination of compulsory expenditure, but then permit the Parliament the final say as regards the statement of revenue.

56. In my opinion, the arguments put forward by the Council are not convincing. Of course, any powers of amendment the Parliament has must be exercised in accordance with the relevant legislative provisions, including those in particular governing the level of the Communities' own resources (cf. Article 203(10) of the Treaty), and it may be true that the relevant provisions leave little room for manoeuvre. It is clear, furthermore, that the Parliament is not entitled to use a power of amendment in such a way as to frustrate the exercise of the Council' s powers; such behaviour would be a breach of the duty of sincere cooperation embodied in Article 5 of the Treaty (see Case 230/81 Luxembourg v Parliament [1983] ECR 255, paragraph 37 of the judgment, and Case 204/86 Greece v Council [1988] ECR 5323, paragraph 16 of the judgment, and see also Case 149/85 Wybot v Faure [1986] ECR 2391, paragraph 23 of the judgment).

57. In my view, however, the fact that Article 203 of the Treaty does not lay down any special rules for the amendment of revenue provisions of the budget does not imply that such amendments are excluded. Indeed, if it is true that (as the Council argues) the legislative provisions would leave the Parliament little discretion, since the statement of revenue is essentially determined by the statement of expenditure, it is perhaps not surprising that the authors of the Treaty did not frame any special procedural rules governing amendments to revenue. In any case, the Council concedes that the Parliament does have a power to amend revenue provisions in certain circumstances, namely where such amendments are made necessary by amendments to non-compulsory expenditure. It has been suggested that it is only in consequence of amendments to expenditure that an amendment of revenue provisions is conceivable: see Sacchettini in Mégret, op. cit., p. 48. In the light of the present dispute, however, it is clear that one must add a further category of case in which the Parliament may wish to make such amendments, namely where there is disagreement between the Council and the Parliament as to how the relevant legislative provisions are to be interpreted and applied. Furthermore, in its rejoinder the Parliament mentioned several other examples taken from the 1991 budgetary procedure. For instance, the Parliament found it necessary to reduce the Council' s figures for revenue arising from the so-called "crisis levy" on the salaries of Community officials and others, imposed by Council Regulation No 3821/81 of 15 December 1981 (Official Journal 1981 L 386, p. 1), the ground of the Parliament' s amendment being that the relevant provisions were due to expire in the course of 1991.

58. It seems to me therefore that there is no good reason for denying the Parliament any role in the establishment of the statement of revenue. I do not think that the Parliament should be denied such a role, merely because to give it one would be to grant it the final say in the matter. As I have already mentioned, the exercise of such powers would in any case be subject to the duty to respect the relevant legislative provisions and the powers and prerogatives of the other institutions. Moreover, from the point of view of the structure of the budgetary procedure, it is in fact the Parliament, and not the Council, which has been granted the last word. Thus, it is the Parliament which finally adopts the budget (Article 203(6) ). The Parliament may, for "important reasons", reject the draft budget in its entirety and ask for a new draft to be submitted to it (see Article 203(8) ). Furthermore, since Article 203(9) gives the Parliament the right, in certain circumstances, to make a further increase in the level of non-compulsory expenditure, the Parliament must have the final say in determining the rate of GNP resources necessary to finance such expenditure (cf. Bernard Paulin "Les pouvoirs du Parlement européen en matière de ressources propres" in Guy Isaac (ed.), Les ressources financières de la CE (Paris 1986), pp. 122-3).

59. If the Parliament were to be denied a power to amend the revenue provisions of the budget in circumstances such as the present ones, it would be required to adopt a budget it considered unlawful, with the limited and drastic alternative of rejecting the budget in its entirety. While it is true that the Parliament would be confronted with the same dilemma in the case of a provision relating to compulsory expenditure, in the latter case the result does at least follow from the express wording of the Treaty. It does not seem to me that the same result should be implied in a case, such as the present one, in which the Treaty is silent.

60. It should be noted, furthermore, that where the Council is given the final say in the budgetary procedure, the possibilities of judicial review are limited. It is the Parliament, and not the Council, which finally adopts the budget. The Parliament has the right to bring an action for annulment only in the limited range of circumstances in which the action is brought to safeguard its prerogatives: see Case C-70/88 Parliament v Council [1990] ECR I-2041, paragraph 27 of the judgment; but it is clear, in any case, that the Parliament could not bring an action against one of its own acts or against the act of its President. Nor, it seems to me, could the Parliament necessarily rely upon the Commission bringing an action (since the Commission and the Parliament may not always agree). Furthermore, the Parliament could not bring an action against the act of the Council establishing a draft budget: see Case 302/87 Parliament v Council [1988] ECR 5615, paragraph 23 of the judgment. At the hearing, the Council claimed it should have the exclusive right to make errors in establishing the revenue provisions of the budget, suggesting that such errors could always be corrected by the Court. In reality, however, the Council is claiming the right to make errors which cannot be rectified in the course of the budgetary procedure, or challenged by the other branch of the budgetary authority in proceedings before the Court. It does not seem to me that such an outcome would be a satisfactory distribution of powers between the two branches.

61. In my opinion, therefore, under the second subparagraph of Article 203(4) the Parliament has the power, in certain circumstances, to amend the provisions of the budget relating to revenue as well as those relating to non-compulsory expenditure, and the ground of annulment which relates to the scope of the Parliament' s powers of amendment is consequently to be rejected. The Council has however in my view succeeded on its first ground.

Admissibility

62. Given the conclusions I have reached, I must now consider what consequences flow from the invalidity of BRS No 2. In its application, the Council requests the Court to annul both (1) BRS No 2, and (2) the President' s declaration that the budget has been finally adopted. The Council also requests the Court to declare (3) that neither annulment shall call into question certain measures taken pursuant to BRS No 2. In its defence, the Parliament raised objections of admissibility to both (1) and (3), and I shall consider each of those objections in turn.

(a) Can the budget be annulled?

63. In its application, the Council asks for the annulment of BRS No 2. It has been suggested by Advocate General Mancini in his Opinion in Case 34/86 Council v Parliament [1986] ECR 2155, at page 2175, that a budget is strictly speaking merely an accounting document containing two statements relating respectively to revenue and expenditure. Although it may therefore be questioned whether the budget itself can be the object of an action for annulment, the adoption of a budget by the Parliament at the end of the budgetary procedure, pursuant to Article 203(6) of the Treaty, would at first sight seem to be a reviewable act, and the Council' s application can be understood as requesting the annulment of such an act. It is true that adoption under Article 203(6) is only the penultimate step in the budgetary procedure, the final step being the President' s declaration under Article 203(7) of the Treaty. It would however be curious if the President' s declaration were the only act capable of annulment. For the declaration made by the President is precisely that the budget "has been finally adopted", that is to say that adoption has taken place pursuant to Article 203(6). Thus, although the act of the President is distinct from the act adopting the budget, it amounts in essence to a public proclamation that the prior act of adoption has already taken place.

64. The Parliament argues, none the less, that the act of the Parliament adopting the budget cannot be the subject of annulment proceedings, and in support of that contention refers to Case 34/86 Council v Parliament (cited above) and Case 302/87 Parliament v Council (cited above in paragraph 60).

65. It is true that in Case 34/86 Council v Parliament, the Court confined itself to annulling the President' s declaration that the budget had been finally adopted, although the Council had also requested annulment of the budget itself. The Court did not however expressly state that the President' s declaration was the only act which could be annulled. Instead, the Court observed, in paragraph 46 of its judgment, that:

"The effect of the annulment of the act of the President of the Parliament is to deprive the 1986 budget of its validity. It is therefore not necessary to give a decision on the Council' s claim for a total annulment of the budget."

66. In Case 302/87 Parliament v Council, the question at issue was the capacity of the Parliament to bring an action for annulment under Article 173 of the Treaty. The Parliament argued, in particular, that in Case 34/86 the Court had implied that each branch of the budgetary authority must be able to take action if the other exceeded its powers, and that it was therefore inconceivable that the Council may take action against the Parliament, but not the Parliament against the Council (see the Report for the Hearing at p. 5624). The Court rejected that argument, observing, at paragraph 24 of its judgment, that:

"... as far as the approval of the budget is concerned, the only measure which can be declared void emanates from an organ of the European Parliament and must therefore be attributed to that institution itself."

It is true that the "measure" referred to in that passage is the declaration of the President that the budget has been finally adopted (see paragraph 23 of the judgment), and that the Court might therefore be interpreted as saying, in paragraph 24, that the President' s declaration is the only measure which can be declared void. It seems to me however that the Court was not addressing, in that passage, the distinction between the act adopting the budget and the act declaring adoption has taken place. The Court was rather making the point that the only acts in the budgetary procedure which are capable of annulment are acts of the Parliament, as opposed to acts of the Council, and that the question of the Parliament' s capacity to bring annulment proceedings was therefore not relevant in that context. Since it was the President' s declaration which had in fact been annulled in the case cited to it (Case 34/86), it was only natural for the Court to refer to that act, and to observe that it was an act of an organ of the Parliament.

67. In my view therefore, Case 302/87 Parliament v Council is not authority for the proposition that the act of the Parliament adopting the budget cannot be the object of annulment proceedings. On the other hand, as I have already mentioned, the case is authority for the proposition that preparatory measures, such as the establishment and amendment of draft budgets in the course of the budgetary procedure, are not themselves susceptible to annulment (see paragraph 23 of the judgment).

68. As the Council points out in its reply, the circumstances of Case 34/86 Council v Parliament were somewhat different from those of the present case. In the earlier case, the Council and the Parliament had not yet come to an agreement on the increase in the level of non-compulsory expenditure, and consequently the budgetary procedure had not yet been completed (see paragraph 43 of the judgment, and see the fifth subparagraph of Article 203(9) of the Treaty). It followed that there was no act of the Parliament adopting the budget. In contrast, in the present case it is not disputed that the procedure laid down in Article 203 has been brought to a conclusion. The question at issue is whether the final steps in that procedure can be allowed to stand, or whether they must be annulled on grounds of invalidity.

69. It is true that in the absence of the President' s declaration under Article 203(7) a budget is not valid, and its adoption by the Parliament is accordingly devoid of legal effects: see paragraphs 8 and 46 of the Court' s judgment in Case 34/86 Council v Parliament (cited above at paragraph 63). It seems to me however that an act can be the object of an action for annulment, even if a further condition must be fulfilled before the act can begin to have legal effects. Indeed, it will generally be the case that such a further condition has to be satisfied. By Article 191 of the Treaty, for instance, directives and decisions take effect only when they are notified to those to whom they are addressed. It remains the case that, when a directive is the object of proceedings under Article 173, it is normally the directive itself which is the object of challenge, and not the act of notification.

70. In its rejoinder, the Parliament draws a different analogy from the one suggested above, and one which it claims leads to the opposite conclusion. According to the Parliament, the annulment of the act of the Parliament adopting the budget would be analogous to the annulment of the deliberations leading to a Council decision; the President' s declaration, on the other hand, is comparable to the act of the Council adopting the decision which is signed by its President and appears as such in the Official Journal.

71. In my view, however, the Parliament' s comparison is not exact. Article 100a of the Treaty, for instance, requires the Council to "adopt the measures ... which have as their object the establishment and functioning of the internal market." Accordingly, when a measure is adopted by the Council under Article 100a, it is stated to be adopted by the Council, and is signed by its President on the Council' s behalf. It is to be noted that Article 100a does not refer to any further act which the President of the Council is required to take in his own capacity. In contrast, Article 203 of the Treaty refers to two distinct acts: "the European Parliament ... shall adopt the budget" (Article 203(6) ), and "the President ... shall declare that the budget has been finally adopted" (Article 203(7) ). Moreover, the reason why two distinct acts are required in this case is not that the Parliament, as opposed to its President, is incompetent to adopt binding measures; for it is to be noted that no separate Presidential declaration is required for the Parliament to take a decision on "provisional twelfths" under the third paragraph of Article 204.

72. It seems to me therefore that it is misleading to draw an analogy between the President of the Parliament acting under Article 203(7), and the President of the Council when he acts on behalf of the Council in signing the text of a measure which the Council has adopted. The President' s declaration under Article 203(7) has a function which is peculiar to the budgetary procedure. The unique feature of that procedure is the manner in which the two branches of the budgetary authority cooperate in the production of the final result, each institution in turn adopting a position to which the other reacts. Hence the need, it seems to me, for a concluding act by a formally distinct personage, namely the President of the Parliament. It is true that the President is no more than an organ of the Parliament; but in my view he is an organ invested with a particular function for the purposes of Article 203(7), namely that of ensuring that the budgetary procedure has been duly completed. Such a function is particularly important where, unlike the present case, there is no formal resolution of the Parliament, and the budget is "deemed to be finally adopted" (under the third subparagraph of Article 203(4), the third subparagraph of Article 203(5), or under Article 203(6) itself). It was for good reason therefore that the authors of the Treaty were careful to distinguish the act of the President in making his declaration from the act of the Parliament in adopting the budget.

73. It will be recalled that in Case 34/86 Council v Parliament (cited above in paragraph 63), the invalidity of the President' s declaration followed from the fact that the budgetary procedure had not been completed. There was accordingly no existing act of the Parliament adopting the budget which could be annulled. Furthermore, there was no other act taken in the course of the budgetary procedure which could have been reviewed by the Court, since, as we have seen, preparatory measures such as the establishment or amendment of a draft budget are not reviewable acts (see above, paragraph 67). In contrast, in the present case the budgetary procedure was duly completed, and issued in the final adoption of a budget by the Parliament under Article 203(6). Although the Parliament' s resolution did not in terms purport to adopt the budget, it is clear that that was its intended effect. It follows that the President was fully entitled to make his declaration. Since the act of the Parliament adopting the budget remains valid until it has been annulled by the Court, it is not until such an annulment has taken place that the President' s declaration can, in consequence, itself be declared invalid. Thus, in the present case the annulment of the act adopting the budget is not only possible, but can in addition be seen to be necessary if the President' s declaration is itself to be annulled.

74. I accordingly reach the conclusion that the Parliament' s first objection of admissibility should be rejected, and that the act of the Parliament adopting BRS No 2 can be the object of an action for annulment.

(b) The effects of annulment

75. In its application, the Council asks the Court to declare that neither of the requested annulments calls into question "the validity of payments made or commitments entered into, or of own resources called up or levied, before the close of the financial year 1990." In its reply, the Council formulates its request somewhat differently, asking the Court to declare that neither annulment calls into question "the validity of measures duly taken in implementation of BRS No 2, the institutions being obliged to adopt without delay the appropriate budgetary provisions which take account of the annulment".

76. In declaring, in the interests of legal certainty, what actions and measures are not called into question by the annulment of a budget, the Court cannot of course be bound by any particular formulation proposed by the applicant. I note furthermore that in Case 34/86 Council v Parliament the Court did not regard itself as competent to declare a partial annulment of the budget (see paragraph 42 of the judgment). It was rather for the Council and the Parliament to take the measures necessary to comply with the Court' s judgment, and hence to resume the budgetary procedure at the appropriate point (see paragraph 47 of the judgment). For that reason, I do not think it would be appropriate for the Court to follow the suggestion made in paragraph 15 of the Council' s reply (albeit inconsistently with the relief sought as set out above), and annul only the revenue provisions of BRS No 2, leaving the expenditure provisions untouched.

77. It may be argued that it is in the interests of legal certainty that the annulments requested by the Council should not call into question the validity of implementing measures which were taken before the date of delivery of the Court' s judgment. The Parliament objects, however, that a declaration to that effect would deprive the Council' s request of any substance: the Court would be taking away with one hand what it had granted with the other. Given that the Council can have no interest in demanding at the same time the annulment of the budget and the full preservation of its effects, the Parliament argues that one or the other of its requests must be held to be inadmissible.

78. It must first be observed that the Council would have an interest in obtaining a declaration of illegality, even if such a declaration were to have no practical effects. The parties have not in fact fully addressed the question of the practical consequences of illegality, and in particular the question of whether there are some effects of BRS No 2 which should not be preserved. At the hearing, the Council suggested that the invalidity of BRS No 2 would have consequential effects on subsequent budgets, but I have some difficulty in reconciling that suggestion with its request to preserve the validity of all measures taken in implementation of BRS No 2.

79. It seems to me that one solution to the difficulty would be to preserve all of the effects of the annulled budget (both so that past transactions will not be affected and so that subsequent budgets will not suffer from a consequential invalidity), but for adjustments to be made in the budgets for subsequent years in order to compensate for the effects of the unlawful provisions. It will be for the institutions responsible for the budgetary procedure to make the appropriate adjustments.

80. In taking such measures, however, it is clear that the institutions require a proper legal basis upon which to act. Article 176 of the Treaty requires (and therefore enables) the institutions to take the necessary measures to comply with the judgment of the Court. If however the Court, in annulling BRS No 2, merely preserved all its effects, it is not clear what consequential measures the institutions would be required (and hence permitted) to take. In particular, it is not clear what authority they would have to make adjustments in subsequent budgets in respect of the Member States' payments of own resources, in order to compensate for the failure in 1990 to set the proper uniform rate of VAT resources.

81. In my view, therefore, it is necessary for the Court to give express authority for such consequential adjustments to be made in budgets adopted after the date of the Court' s judgment. Such adjustments will compensate any Member States which have, as a result of the unlawful adoption of BRS No 2, paid more VAT or GNP own resources than would have been the case if a valid budget had been adopted, and will be made at the expense of any Member States which have paid too little.

Costs

82. The Council has not made any request for costs to be awarded against the unsuccessful party. The appropriate order therefore is that the parties should bear their own costs.

Conclusion

83. I am accordingly of the opinion that the Court should:

(1) Declare void the act of the European Parliament of 11 July 1990, whereby the Parliament adopted the amending and supplementary budget No 2 of the European Communities for the financial year 1990;

(2) Declare void the act of the President of the European Parliament of 11 July 1990, whereby he declared that the budget had been finally adopted ("Final adoption of the amending and supplementary budget No 2 of the European Communities for the financial year 1990");

(3) Declare that, without prejudice to (4) below, the annulment of the aforesaid act of the Parliament and the aforesaid act of the President may not call into question the validity of the payments made and the commitments entered into, or any other measures taken, in pursuance of the amending and supplementary budget No 2 for 1990 as published in the Official Journal, before the date of delivery of this judgment;

(4) Declare that the Parliament shall, in adopting budgets after the date of delivery of this judgment, make such adjustments in the calling up of own resources as may be necessary to redress the consequences of the unlawful adoption of BRS No 2;

(5) Order the parties, including the intervener, to bear their own costs.

(*) Original language: English.