JUDGMENT OF THE COURT OF FIRST INSTANCE (Fourth Chamber)

23 February 2006 ( )

(Member of the temporary staff – Termination of contract – Article 47(2)(a) of the Conditions of Employment of Other Servants of the European Communities – Observance of the provisions of the contract – Legitimate expectations)

In Case T‑471/04,

Georgios Karatzoglou, formerly a member of the temporary staff of the European Agency for Reconstruction, residing in Ioannina (Greece), represented by S. Pappas, lawyer,

applicant,

v

European Agency for Reconstruction (EAR), represented by J.-N. Louis, S. Orlandi, X. Martin and C. Manolopoulos, lawyers, with an address for service in Luxembourg,

defendant,

APPLICATION for annulment of the decision of the EAR of 26 February 2004 to terminate the applicant’s contract of employment,

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Fourth Chamber),

composed of H. Legal, President, P. Mengozzi and I. Wiszniewska‑Białecka, Judges,

Registrar: I. Natsinas, Administrator,

having regard to the written procedure and further to the hearing on 17 November 2005,

gives the following

Judgment

Legal context and the facts at the origin of the dispute

1 Article 10 of Council Regulation (EC) No 2667/2000 of 5 December 2000 on the European Agency for Reconstruction (OJ 2000 L 306, p. 7) provides:

‘The Agency’s staff shall be subject to the rules and regulations applicable to officials and other servants of the European Communities. The Governing Board, in agreement with the Commission, shall adopt the necessary implementing rules.

The Agency’s staff shall consist of a strictly limited number of officials assigned or seconded by the Commission or Member States to carry out management duties. The remaining staff shall consist of other employees recruited by the Agency for a period strictly limited to its requirements.’

2 Article 47 of the Conditions of employment of other servants of the European Communities, in the version in force until 30 April 2004 and applicable to the facts of the present case, (‘the CEOS’) states:

‘Apart from cessation on death, the employment of temporary staff shall cease:

…

2. Where the contract is for an indefinite period:

(a) at the end of the period of notice stipulated in the contract; the length of the period of notice shall not be less than two days for each completed month of service, subject to a minimum of 15 days and a maximum of three months. In the case of a servant within the meaning of Article 2(d) the period of notice shall not be less than one month for each completed year of service, subject to a minimum of three months and a maximum of 10 months. The period of notice shall not, however, commence to run during maternity leave or sick-leave, provided such sick-leave does not exceed three months. It shall, moreover, be suspended during maternity or sick-leave subject to the limits aforesaid;

…’

3 The applicant, Georgios Karatzoglou, was recruited by the European Agency for Reconstruction (EAR) as a member of the temporary staff within the meaning of Article 2(a) of the CEOS, starting on 7 November 2001, for a fixed period of 18 months, in accordance with Article 4 of his contract of employment (‘the contract’).

4 Article 2 of the contract stipulates that the applicant is to be employed as an administrative assistant and that the place of employment is to be Podgorica (Montenegro).

5 Article 5(b) of the contract provides:

‘This contract may be terminated by the institution or by the staff member for any of the reasons specified in Articles 47 to 50 of the [CEOS], subject to the conditions laid down in those articles.

For the purposes of Article 47(1)(b) of the [CEOS], the period of notice shall be [three] months. Where the contract has been renewed, the period of notice shall be one month for each year of service, up to a maximum of six months.’

6 On 1 March 2002, the contracting parties amended, by Addendum No 2 to the contract, Article 2 of the contract as follows:

‘The staff member shall be employed as Head of the Administrative Section. The place of employment shall be Skopje.’

7 On 7 May 2003, the parties agreed, in the form of an Addendum No 4 to the contract, to continue their contractual relationship. Article 4 of the contract, as amended, provides:

‘The contract shall run for an indefinite period. However, the duration shall not exceed the expiry date of the [EAR].

The [EAR] reserves the right to terminate the contract following a significant reduction or winding-up of its operations before the expiry date of the [EAR].’

8 According to that addendum, all other articles initially agreed upon in the contract of employment were to remain unaltered.

9 On 26 February 2004, the director of the EAR decided to terminate the applicant’s contract in the following terms:

‘I regret to inform you that the decision has been taken to terminate your contract of employment with the [EAR]. The notice period will be of three months, starting on 27th February 2004, in accordance with Article 47(2) of the [CEOS] and the second paragraph of Article 5(b) of your contract.’

10 On 26 March 2004, the applicant was summoned by the Head of the Skopje Operational Centre, and, in the presence of a member of the EAR staff, was handed the decision to terminate his contract.

11 On 27 May 2004, the applicant lodged a complaint against the decision to terminate his contract, pursuant to Article 90(2) of the Staff Regulations of Officials of the European Communities (‘the Staff Regulations’), which is applicable to him by virtue of Article 46 of the CEOS.

12 That complaint was rejected by implication as the EAR failed to reply before 27 September 2004, which was the date of expiry of the four-month period laid down in Article 90(2) of the Staff Regulations.

Procedure and forms of order sought

13 By application lodged at the Registry of the Court of First Instance on 6 December 2004, the applicant brought the present proceedings.

14 On 3 March 2005, the Commission lodged its defence at the Registry of the Court of First Instance.

15 Pursuant to Article 47(1) of the Rules of Procedure of the Court of First Instance, the Court (Fourth Chamber) decided that a second exchange of pleadings was not necessary in this case. Upon hearing the report of the Judge-Rapporteur, the Court of First Instance decided to open the oral procedure.

16 The parties presented oral argument and replied to the Court’s oral questions at the hearing on 17 November 2005.

17 The applicant claims that the Court should:

– annul the implied rejection of his complaint and, consequently, the termination of his contract;

– order the EAR to pay the costs.

18 The EAR contends that the Court should:

– dismiss the application;

– order the applicant to pay the costs.

Law

19 Under Article 91(1) of the Staff Regulations and according to settled case-law, an application for annulment of a decision rejecting a complaint has the effect of bringing before the Community judicature the act adversely affecting the applicant against which the complaint was submitted (Case 293/87 Vainker v Parliament [1989] ECR 23, paragraph 8; Case T-80/04 Castets v Commission [2005] ECR-SC I-A-0000 and II-0000, paragraph 15, and the case-law cited). Consequently, the forms of order sought by the applicant must be understood as seeking annulment of the decision of 26 February 2004 terminating the contract (‘the contested decision’).

20 In support of his action the applicant submits five pleas in law alleging respectively breach of the duty to state reasons, breach of the principle of protection of legitimate expectations, infringement of Article 47 of the CEOS concerning notice, misuse of powers and infringement of the principle of sound administration.

21 In the circumstances of the present case it is necessary to examine, first, the second plea submitted by the applicant, alleging breach of the principle of protection of legitimate expectations.

Arguments of the parties

22 The applicant submits that, according to settled case-law, the right to rely on the principle of protection of legitimate expectations is open to any individual who is in a situation in which it is clear that the Community administration has, by giving him precise assurances, led him to entertain reasonable expectations. Only promises which run counter to the provisions of the Staff Regulations cannot give rise to a legitimate expectation on the part of the person concerned.

23 In Case T-175/03 Schmitt v EAR [2004] ECR-SC I-A-0000 and II-0000, which concerned the same type of contract as that between the applicant and the EAR, the Court of First Instance held that that type of contract was ambiguous. On the one hand, the contract refers to Article 47(2) of the CEOS, which allows the EAR to terminate temporary contracts without any reason being given, on the sole condition that the period of notice is complied with. On the other hand, the contract itself provides that it is concluded for an indefinite period, unless there is a significant reduction or winding-up of the operations of the EAR.

24 Resolving that inconsistency, the Court stated that, in those circumstances, Article 47(2) of the CEOS is applicable only inasmuch as it provides for a period of notice. It cannot exempt the EAR from abiding by the other clauses of the contract and, in particular, from the obligation to justify the termination of the contract by citing a significant reduction or winding-up of its operations (Schmitt v EAR, paragraph 54). Accordingly, any member of temporary staff who has signed such a contract can reasonably expect that his contract will not be terminated unless those two conditions are satisfied.

25 Moreover, it follows from a principle of employment law, according to which imprecise provisions in a contract of employment must be interpreted in favour of the weaker party (Schmitt v EAR, paragraph 55), that the notion of reduction of the operations of the EAR justifying termination of a contract is not to be interpreted broadly and cannot mean reduction of the staff in some sections of the EAR.

26 In the present case, the EAR did not prove that the reason for terminating the contract was related to any reduction of its operations.

27 Consequently, the termination of the contract and the implied rejection of the applicant’s complaint disregard the applicant’s legitimate expectations. Furthermore, his legitimate expectations were reinforced by the attitude adopted by the EAR administration towards him, until a second administrative assistant was recruited. On 7 November 2001 the applicant was initially recruited by the EAR as an administrative assistant. On 1 March 2002 he was promoted to Head of the Administrative Section. On 7 May 2003 his contract was renewed but, this time, for an indefinite period. According to the applicant, this progressive recognition by his service is obviously the result of his performance and dedication to the EAR. It is the reason why he entertained the legitimate expectation that he would be able to continue working until the expiry date of the EAR, no sign to the contrary having ever been given to him. The contested decision unlawfully disregarded the expectation which had arisen between the applicant and his service. For those reasons, that decision should be annulled.

28 For its part, the EAR submits that, were the Court to find that the contract contained an internal inconsistency, no legitimate expectations could arise from such an unclear text.

29 It adds that it is evident from Case T-199/01 G v Commission [2002] ECR-SC I-A-207 and II-1085, paragraph 38, that, in order to establish a breach of the principle of the protection of legitimate expectations, three conditions must be satisfied: first, specific, unconditional and consistent assurances originating from authorised and reliable sources must have been given to the person concerned by the Community administration; second, those assurances must be such as to lead the person to whom they are addressed to entertain a legitimate expectation; third, the assurances given must comply with the relevant rules.

30 The first condition is not satisfied in this case, as the assurances given to the applicant were not specific, unconditional or consistent, since the wording of the contract and Addendum No 4 discloses an inconsistency between the second paragraph of Article 4 and Article 5(b) thereof.

31 Nor is the second condition satisfied because, if there is an inconsistency in the text, the applicant’s expectations are unfounded.

32 The third condition is not satisfied either, since the advantage arising from the legitimate expectations must comply with the law in force. It is evident from Article 10 of Regulation No 2667/2000 that the EAR has a strictly limited number of officials and, as regards other members of staff, they are recruited by the EAR for a period strictly limited to its requirements.

Findings of the Court

33 It must be pointed out that, according to settled case-law, the right to rely on the principle of the protection of legitimate expectations, which is one of the fundamental principles of the Community, extends to any individual in a situation where it is clear that the Community administration has, by giving him precise assurances, led him to entertain reasonable expectations (Schmitt v EAR, paragraph 46, and the case-law cited).

34 In addition, such assurances must in any event comply with the provisions of the Staff Regulations (see Schmitt v EAR, paragraph 47, and the case-law cited).

35 Thus, in the present case, it is necessary to examine whether Article 4 of the contract, as amended by Addendum No 4, gave the applicant the legitimate assurance that his contract would not be terminated, except under the conditions laid down in Article 47(2)(b) and Articles 48 to 50 of the CEOS, unless there was a significant reduction or winding-up of the operations of the EAR before the expiry date of its mission.

36 The amendment of Article 4 of the initial contract by Addendum No 4 brought about an ambiguous situation as regards the content of the contract, in so far as the first subparagraph of Article 5(b) of the contract, which was not amended and remained in force, contained a reference to the EAR’s right to terminate the contract for any of the reasons specified in Articles 47 to 50 of the CEOS.

37 Thus, had the second paragraph of Article 4 not been added, the EAR would indisputably have had the right to terminate the applicant’s contract for one of the reasons specified in Articles 47 to 50 of the CEOS, subject to compliance with the conditions laid down in those articles, as provided for in Article 5(b) of the initial contract. However, the addition of the second paragraph of Article 4 could have given the applicant the impression that the EAR had restricted its power to terminate the contract to circumstances in which there was a reduction or winding-up of the operations of the EAR before the expiry date of its mission.

38 It is therefore necessary to find that the applicant could have believed that the purpose of that contractual provision was to indicate, in advance, the ground for possible subsequent termination – namely a significant reduction or winding-up of the operations of the EAR before the expiry date of its mission – so that, under the contractual arrangements as amended by Addendum No 4, Article 5(b) of the contract could be applied only partially. Thus, from the point at which Addendum No 4 came into effect, Article 5(b) of the contract could be interpreted as meaning that the first subparagraph of that provision referred to Article 47(2)(a) of the CEOS, but that termination of the contract had to be justified by one of the reasons laid down in the second paragraph of Article 4 of the contract, as amended by Addendum No 4, and that, since Article 4 of the new contract did not provide for a period of notice, notice continued to be governed by the last sentence of the second subparagraph of Article 5(b) of the initial contract.

39 In addition, the applicant could have entertained a legitimate expectation that imprecise provisions of a contract of employment would be interpreted in favour of the weaker contracting party (see, to that effect, Schmitt v EAR, paragraph 55).

40 Consequently, the applicant could have believed that, in the light of the wording of Article 4 of the contract, as amended by Addendum No 4, his contract would not be terminated, except under the conditions laid down in Article 47(2)(b) and Articles 48 to 50 of the CEOS, unless there was a significant reduction or winding-up of the operations of the EAR before the expiry date of its mission.

41 Moreover, the belief thus generated in the mind of the applicant can be regarded as legitimate.

42 First of all, the interpretation in question may be regarded as also following from reasoning ‘a majore ad minus’. Since the termination of contracts for an indefinite period, with the period of notice stipulated in the contract and in accordance with Article 47(2) of the CEOS, falls within the discretion of the competent authority, no provision of the CEOS prohibits that authority from restricting its power to terminate contracts, in the interests of the staff, by means of contractual provisions (see Schmitt v EAR, paragraph 56, and the case-law cited).

43 Next, according to settled case-law, since the basis of the relationship between a member of the temporary staff and the institution concerned is the contract of employment, justification for the unilateral termination of such a contract, which is expressly provided for in Article 47 of the CEOS, lies in the contract and there is no need, therefore, for a statement of reasons. It may accordingly be considered, similarly, that a restriction of the right to terminate may also derive from such a contract (see, to that effect, Schmitt v EAR, paragraph 57, and the case-law cited).

44 Moreover, that view is supported by the case-law according to which no statement of reasons has to be given for the dismissal of a member of the temporary staff which is decided upon the basis of Article 47(2) of the CEOS, unless such an obligation is expressly provided for in the contract of employment (see Schmitt v EAR, paragraph 58, and the case-law cited).

45 Consequently, the expectation that the applicant could entertain that Article 4 of the contract, as amended by Addendum No 4, had restricted the EAR’s power to terminate his contract, pursuant to Article 47(2)(a) of the CEOS, solely to circumstances in which there was a significant reduction or winding-up of the operations of the EAR before the expiry date of its mission, must be regarded as legitimate.

46 The argument, raised by the EAR at the hearing, that a note dated 28 February 2004 from the applicant to the EAR shows that there was no such legitimate expectation, since it raises the possibility of termination of the contract by the EAR, is irrelevant in that regard. The note in question solely sets out remarks allegedly made by the Head of Administration of the EAR and does not therefore contain any evidence of the possible existence of a legitimate expectation on the part of the applicant based on Article 4 of the contract. In addition, that note is not, in any case, such as to cast doubt on the Court’s assessment, founded in this case on the applicant’s legitimate expectations derived from contractual provisions.

47 Therefore, since the applicant could entertain a legitimate expectation that his contract would not be terminated, except under the conditions laid down in Article 47(2)(b) and Articles 48 to 50 of the CEOS, unless there was a significant reduction or winding-up of the operations of the EAR before the expiry date of its mission, and the EAR terminated that contract without even citing such a reduction or winding-up, it must be found that his legitimate expectations were disregarded.

48 Consequently, the second plea, alleging breach of the principle of protection of legitimate expectations, must be upheld.

49 Therefore, without its being necessary to examine the other pleas and arguments on which the applicant relies, the contested decision must be annulled.

Costs

50 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the defendant has been unsuccessful it must be ordered to pay the costs, in accordance with the form of order sought by the applicant.

On those grounds,

THE COURT OF FIRST INSTANCE (Fourth Chamber)

hereby:

1. Annuls the decision of the European Agency for Reconstruction (EAR) of 26 February 2004 terminating the applicant’s contract of employment;

2. Orders the EAR to pay the costs.













Legal Mengozzi Wiszniewska-Białecka

Delivered in open court in Luxembourg on 23 February 2006.

Registrar President