JUDGMENT OF THE COURT (Grand Chamber)

19 November 2013 ( *1 )

‛Action for failure to act — Annual adjustment of the remuneration and pensions of officials and other servants of the European Union — Staff Regulations — Adjustment of correction coefficients — Council decision — Refusal to adopt the Commission’s proposal — Failure to act — Inadmissibility’

In Case C‑196/12,

ACTION for failure to act under Article 265 TFEU, brought on 26 April 2012,

European Commission, represented by J. Currall, D. Martin and J.‑P. Keppenne, acting as Agents, with an address for service in Luxembourg,

applicant,

supported by

European Parliament, represented by A. Neergaard and S. Seyr, acting as Agents,

intervener,

v

Council of the European Union, represented by M. Bauer and J. Herrmann, acting as Agents,

defendant,

supported by

Federal Republic of Germany, represented by T. Henze and J. Möller, acting as Agents,

Kingdom of Spain, represented by N. Díaz Abad and S. Centeno Huerta, acting as Agents,

Kingdom of the Netherlands, represented by C. Wissels and M. Bulterman, acting as Agents,

United Kingdom of Great Britain and Northern Ireland, represented by E. Jenkinson and J. Beeko, acting as Agents, and R. Palmer, Barrister,

interveners,

THE COURT (Grand Chamber),

composed of V. Skouris, President, K. Lenaerts, Vice-President, A. Tizzano, R. Silva de Lapuerta, T. von Danwitz (Rapporteur), E. Juhász, M. Safjan, C.G. Fernlund and J.L. da Cruz Vilaça, Presidents of Chambers, A. Rosas, G. Arestis, J.-C. Bonichot, A. Arabadjiev, C. Toader and C. Vajda, Judges,

Advocate General: Y. Bot,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after hearing the Opinion of the Advocate General at the sitting on 12 September 2013,

gives the following

Judgment

1 By its application, the European Commission asks the Court to declare that, by not adopting the Commission’s proposal for a Council Regulation adjusting, with effect from 1 July 2011, the remuneration and pension of the officials and other servants of the European Union and the correction coefficients applied thereto (COM(2011) 820 final; ‘the proposal for a regulation’), the Council of the European Union failed to fulfil its obligations under the Staff Regulations of Officials of the European Union, set out in Council Regulation (EEC, Euratom, ECSC) No 259/68 of 29 February 1968 laying down the Staff Regulations of Officials and the Conditions of Employment of Other Servants of the European Communities and instituting special measures temporarily applicable to officials of the Commission (OJ, English Special Edition 1968(I), p. 1), as amended by Regulation (EU, Euratom) No 1080/2010 of the European Parliament and of the Council of 24 November 2010 (OJ 2010 L 311, p. 1) (‘the Staff Regulations’).

Legal context

2 Article 65 of the Staff Regulations provides: ‘1. The Council shall each year review the remuneration of the officials and other servants of the Union. This review shall take place in September in the light of a joint report by the Commission based on a joint index prepared by the Statistical Office of the European Union in agreement with the national statistical offices of the Member States; the index shall reflect the situation as at 1 July in each of the countries of the Union. During this review the Council shall consider whether, as part of economic and social policy of the Union, remuneration should be adjusted. Particular account shall be taken of any increases in salaries in the public service and the needs of recruitment. 2. In the event of a substantial change in the cost of living, the Council shall decide, within two months, what adjustments should be made to the weightings and if appropriate to apply them retrospectively. 3. For the purposes of this article, the Council shall act by a qualified majority, on a proposal from the Commission, as provided in Article 16(4) and (5) [TEU].’

3 Under Article 82(2) of the Staff Regulations, where the Council, in accordance with Article 65(1) of the Staff Regulations, decides to adjust remunerations, the same adjustment is to be applied to pensions.

4 Pursuant to Article 65a of the Staff Regulations, the rules for implementing Articles 64 and 65 thereof are set out in Annex XI to the Staff Regulations.

5 Article 1 of Annex XI to the Staff Regulations, which is part of Section 1 in Chapter 1 of that annex, provides that, for the purposes of the review provided for in Article 65(1) of the Staff Regulations, Eurostat is to draw up every year before the end of October a report on changes in the cost of living in Brussels (Belgium) (Brussels International Index), changes in the cost of living outside Brussels (economic parities and implicit indices) and changes in the purchasing power of salaries of national civil servants in central government in eight Member States (specific indicators).

6 Article 3 of Annex XI to the Staff Regulations, which forms Section 2 in Chapter 1 of that annex, headed ‘Arrangements for the annual adjustment of remuneration and pensions’, provides: ‘1. Under Article 65(3) of the Staff Regulations, the Council, acting on a Commission proposal and on the basis of the criteria set out in Section 1 of this Annex, shall take a decision before the end of each year adjusting remuneration and pensions, with effect from 1 July. 2. The amount of the adjustment shall be obtained by multiplying the Brussels International Index by the specific indicator. The adjustment shall be in net terms as a uniform across-the-board percentage. ... 5. No correction coefficient shall be applicable in Belgium and Luxembourg. The correction coefficients applicable: (a) to the salaries of officials of the European Union serving in each of the Member States and in certain other places of employment, (b) ... pensions paid in the other Member States for the part corresponding to the acquired rights acquired before 1 May 2004, shall be determined on the basis of the ratios between the corresponding economic parities referred to in Article 1 and the exchange rates specified in Article 63 of the Staff Regulations for the relevant countries. ...’

7 Chapter 5 of Annex XI to the Staff Regulations is headed ‘Exception Clause’. It consists solely Article 10 which provides: ‘If there is a serious and sudden deterioration in the economic and social situation within the Union, assessed in the light of objective data supplied for this purpose by the Commission, the latter shall submit appropriate proposals on which the European Parliament and the Council shall decide in accordance with Article 336 [TFEU].’

8 Under Article 15(1) of Annex XI, its provisions are to apply from 1 July 2004 to 31 December 2012.

Background to the dispute

9 In December 2010, since the Council considered that the latest financial and economic crises that had occurred within the Union were creating a ‘serious and sudden deterioration of the economic and social situation within the Union’ within the meaning of Article 10 of Annex XI to the Staff Regulations, it asked the Commission to submit, on the basis of Article 10, appropriate proposals in time for the European Parliament and itself to examine and adopt them before the end of 2011.

10 In response to that request, on 13 July 2011 the Commission submitted to the Council the report on the exception clause (Article 10 of Annex XI to the Staff Regulations) (COM(2011) 440 final), in which the Commission concluded, in reliance on 15 indicators and on the European economic forecasts published by its Directorate-General for Economic and Financial Affairs on 13 May 2011, that there was no need to submit a proposal under Article 10 of Annex XI to the Staff Regulations.

11 Examination of that report led to subsequent discussions within the Council, the outcome being that a further request was made by the Council to the Commission that Article 10 should be applied and that an appropriate proposal for the adjustment of remuneration should be submitted.

12 In response to that request, the Commission submitted Communication COM(2011) 829 final of 24 November 2011, providing supplementary information to the report COM(2011) 440 final, which was based on, inter alia, the economic forecasts published by the Commission’s Directorate-General for Economic and Financial Affairs on 10 November 2011. The Commission again concluded that the Union was not facing an extraordinary situation for the purposes of Article 10 of Annex XI to the Staff Regulations and that it was not therefore in a position to trigger the exception clause.

13 On the same date, the Commission submitted its proposal for a regulation, with an explanatory memorandum. The adjustment of remuneration proposed on the basis of the ‘normal’ method laid down in Article 3 of Annex XI to the Staff Regulations was 1.7%.

14 By Council Decision 2011/86/EU of 19 December 2011 concerning the Commission’s proposal for a Council Regulation adjusting with effect from 1 July 2011 the remuneration and pension of the officials and other servants of the European Union and the correction coefficients applied thereto (OJ 2011 L 341, p. 54), the Council decided ‘not to adopt the … proposal [for a regulation]’, inter alia, for the following reasons: ‘(8) ... The Council is convinced that the financial and economic crisis currently taking place within the Union and resulting in substantial fiscal adjustments, inter alia, national officials’ salary adjustments, in a great number of Member States constitutes a serious and sudden deterioration of the economic and social situation within the Union. ... (13) In the light of the above, the Council considers that the Commission’s position as regards the existence of a serious and sudden deterioration in the economic and social situation and its refusal to submit a proposal under Article 10 of Annex XI to the Staff Regulations is based on manifestly insufficient and erroneous grounds. (14) Since the … Court of Justice held in [the case giving rise to the judgment of 24 November 2010 in] Case C-40/10 [Commission v Council [2010] ECR I-12043] that, for the period of application of Annex XI to the Staff Regulations, the procedure laid down in Article 10 thereof constitutes the only means of taking account of an economic crisis in the adjustment of remuneration, the Council was dependent on a proposal from the Commission to apply that Article in times of crisis. (15) The Council is convinced that, in light of the wording of Article 10 of Annex XI to the Staff Regulations and under the duty of sincere cooperation between the institutions as enshrined in the second sentence of Article 13(2) [TEU], the Commission was obliged to submit an appropriate proposal to the Council. The Commission’s conclusions and its failure to submit such a proposal are therefore in breach of that obligation. (16) As the Council may act only on a proposal from the Commission, the Commission’s failure to draw the correct conclusions from the evidence and to present a proposal under Article 10 of Annex XI to the Staff Regulations has prevented the Council from reacting correctly to the serious and sudden deterioration in the economic and social situation through the adoption of an act under Article 10 of Annex XI to the Staff Regulations.’

15 While bringing an action under Article 263 TFEU for annulment of Decision 2011/866, in the case which gave rise to the judgment of 19 November 2013 in Case C‑63/12 Commission v Council [2013] ECR, the Commission sent to the Presidency of the Council a letter dated 25 January 2012, registered at the Secretariat of the Council on 20 February 2012, inviting the Council, under Article 265 TFEU, to adopt the proposal for a regulation within two months from the date of receipt of that letter. The Council ‘took note’ of that letter.

Forms of order sought by the parties and the procedure before the Court

16 The Commission claims that the Court should: — declare that, by not adopting the proposal for a regulation, the Council failed to fulfil its obligations under the Staff Regulations, and — order the Council to pay the costs.

17 The Council contends that the Court should dismiss the appeal and order the Commission to pay the costs.

18 By order of the President of the Court of 4 September 2012, the European Parliament was granted leave to intervene in support of the form of order sought by the Commission, while leave was granted to the Federal Republic of Germany, the Kingdom of Spain, the Kingdom of the Netherlands and the United Kingdom of Great Britain and Northern Ireland to intervene in support of the form of order sought by the Council.

The action

19 The Commission submits that this action for failure to act has been brought as a matter of precaution, in the event that the Council’s attitude is held to constitute a failure to act, in particular with respect to the adjustment of correction coefficients, and in the event that, in the action for annulment brought against Council Decision 2011/866, that decision is not considered by the Court to be a challengeable act.

20 The Commission submits that, if that decision does not constitute a ‘genuine’ refusal to adopt the proposal for a regulation, the Council was in breach of its obligation to act arising from Article 3(1) of Annex XI to the Staff Regulations, namely its obligation to adopt the proposal submitted by the Commission before the end of the current year. In the absence of a proposal under Article 10 of Annex XI, a formal condition for the application of Article 10 was not satisfied, and consequently, pursuant to the judgment of 24 November 2010 in Case 40/10 Commission v Council, the Council was obliged to adopt the proposal for a regulation based on Article 3 of Annex XI.

21 Under Article 265(1) TFEU, a European Union institution may bring an action before the Court seeking a declaration that, in infringement of the Treaties, the Council has failed to act.

22 That legal remedy is based on the premiss that unlawful inaction on the part of an institution makes it possible, particularly for other institutions, to bring an action before the Court seeking a declaration that the failure to act is contrary to the FEU Treaty. A failure to act, for the purposes of Article 265 TFEU, means a failure to take a decision or to define a position, and not the adoption of a measure different from that sought or considered necessary by the applicant (see, to that effect, inter alia, Joined Cases C-15/91 and C-108/91 Buckl and Others v Commission [1992] ECR I-6061, paragraph 17, and Case C-107/91 ENU v Commission [1993] ECR I-599, paragraph 10 and case‑law cited).

23 In this case, the Council defined its position on the proposal for a regulation by adopting Decision 2011/866, which is an act against which an action can be brought under Article 263 TFEU, as the Court held in paragraphs 29 to 33 of the judgment of 19 November 2013 in Case C‑63/12 Commission v Council.

24 In order to make known its position on that proposal, the Council formally adopted a ‘decision’ which was published in series L of the Official Journal of the European Union, the series which contains European Union legislation.

25 Further, the Council stated, in the recitals of the preamble to Decision 2011/866, that, in the light of the current financial and economic crisis, the Commission was obliged to submit an appropriate proposal under the exception clause laid down in Article 10 of Annex XI to the Staff Regulations.

26 It follows that the Council did not fail to act on the proposal for a Regulation, which was based on Article 3 of that annex but that, in essence, the Council rejected it.

27 The position thus adopted relates to the whole proposal for a regulation, including the adjustment of correction coefficients, even though the Council did not set out separately the reasons why it refused to adjust those correction coefficients.

28 First, the title of Decision 2011/866 and its operative part refer to the full title of the proposal for a regulation.

29 Secondly, the exception clause provided in Article 10 of Annex XI to the Staff Regulations and the statement of reasons in Decision 2011/866, which is based on the ground that the Commission should have submitted a proposal on the basis of Article 10 instead of submitting a proposal for a regulation on the basis of Article 3 of Annex XI, cover the annual adjustment of remuneration and pensions in its entirety, in other words both the adjustment of the general level of remuneration and pensions and the adjustment of correction coefficients, as the Court held in paragraphs 90 to 95 and 100 to 103 of the judgment of 19 November 2013 in Case C‑63/12 Commission v Council.

30 In those circumstances, the conditions laid down in Article 265 TFEU are not satisfied.

31 Consequently, the action seeking a declaration of failure to act must be dismissed as being inadmissible.

Costs

32 Under Article 138(1) of the Rules of Procedure of the Court of Justice, the unsuccessful party must be ordered to pay the costs if they have been applied for in the other party’s pleadings. Since the Council has applied for costs and the Commission has been unsuccessful, the latter must be ordered to pay the costs. Under Article 140(1) of those rules the Member States and the institutions which have intervened in the case must bear their own costs.

On those grounds, the Court (Grand Chamber) hereby:

1. Dismisses the action;

2. Orders the European Commission to pay the costs;

3. Orders the Federal Republic of Germany, the Kingdom of Spain, the Kingdom of the Netherlands, the United Kingdom of Great Britain and Northern Ireland and the European Parliament to bear their own costs.

[Signatures]

( *1 ) Language of the case: French.