8.

The time has now come to summarize the facts of the case. However, before touching on the heart of the matter and in order to avoid the ambiguities to which the discrepancy between the figures supplied by the parties might give rise, it is appropriate to recall that, according to the Council (note from its President dated 9 July 1985), the Parliament had, in adopting the 1985 budget, approved supplementary NCE in the sum of 94.3 million ECU (hereinafter referred to as m ECU) in respect of commitment appropriations and in the sum of 29.6 m ECU in respect of payment appropriations. During the procedure relating to the 1986 budget and unlike the Commission and the Parliament, the Council took as the basis for calculation for the purposes of determining the application of the maximum rate not the amount of NCE finally entered in the new budget but the sum corresponding to the total less the supplementary appropriations I have mentioned. For my part, I will use the figures which appear in the Commission's and the Parliament's documents; notwithstanding the Council's reservations, neither the Council nor any of the Member States has asked the Court to verify whether there were any unlawful acts on the part of the Parliament in the course of the 1985 procedure. That said, let me now go on to describe the conduct of the parties during the seven phases into which Article 203 divides the budgetary procedure. First phase. By letter of 23 April 1985 the Commission informed the budgetary authority that the maximum rate of increase in NCE was equivalent to 7.1% over the same expenditure in the 1985 budget. Second phase. On 31 July the Commission submitted to the Council the preliminary draft budget and pointed out in the first place that it had been based on two events the effects of which would begin to be felt as from 1 January 1986: the decision of the Council of 7 May 1985 which had raised to 1.4% the proportion of VAT destined for own resources and the enlargement of the Community to include Spain and Portugal. The objectives pursued by the Commission as regards the Community of Ten were then indicated. In that respect, having regard to the fact that in the case of NCE the ‘cost of the past’, that is to say the total of the commitments undertaken in the preceding financial years, was now calculated as being10300 m ECU (8200 m ECU of which were for the three structural Funds), it was considered that in order to honour them it would be necessary to appropriate payments of about 4400 m ECU (of which 4000 m ECU in NCE) and it was noted that this would further reduce the already narrow margin available for financing the new Community policies. It therefore appeared essential to limit the growth of commitments and payments in NCO by confining it for 1986 within the limit of the maximum percentage, in the event the 7.1%. This rule was however subject to exceptions. Thus, in order to cover fully the cost of the past as regards the structural Funds, it would be necessary to have recourse to the reserves in the chapters in point. Similarly, the 7.1% limit would have to apply neither to the payment appropriations for the new policies nor to the specific reserves (Chapter 100) nor to the general reserve (Chapter 101). Finally, as regards the effect of the enlargement, it was stated that the draft ‘carries all the appropriations’ required for the new Member States to participate, ‘from the outset, in all the Community policies’ in accordance with the ‘transitional procedures laid down in the accession agreements’. Over the transitional period Spain and Portugal would receive a financial compensation which would decline with their gradual integration into the Community policies; for the first year that compensation would amount to 87% of the VAT payments (Preliminary Draft 1986, Vol. 7, Commission, Doc. COM (85) 175 EN, p. A/8). Basing itself on the NCE of the same type entered in the 1985 budget, the Commission calculated that the application of a maximum rate of 7.1% would make it possible to increase the commitment appropriations by another 588 m ECU and the payment appropriations by another 435 m ECU (with the system of calculation adopted by the Council these increases are reduced respectively to 582 and 433 m ECU). In absolute figures, NCE would leap to about 8882 m ECU for commitment appropriations and to slightly over 6568 m ECU for payment appropriations. The total needs identified by the Commission in respect of NCE amounted, however, to more than 10546 m ECU for commitments and more than 9021 m ECU for payments. Third phase. When it met on 8 July the Council had for the first time applied the ‘conclusions’ of 4 December 1984 fixing the ‘reference framework’ relating to NCE at 8782 m ECU for payments and at 6537 m ECU for commitments. Ten days later its members met a delegation from the Parliament and at the meeting on 17 to 18 September they established the draft budget. That draft envisaged an increase of 578 m ECU, equivalent to 7.08%, in respect of commitment appropriations and of 430 m ECU, equivalent to 7.04%, in respect of payment appropriations. In absolute figures, commitments amounted to 8788 m ECU and payments to 6533 m ECU; compared with the total appropriations in the preliminary draft, they had thus been reduced by about 22%. In the explanatory memorandum it is stated that the Council took into account ‘the budgetary effects arising from the accession to the Communities of two new Member States ... [and] endeavoured to see that [they] participate in most Community policies from their first year of membership’. The Council was, however, ‘prepared to reconsider the appropriations entered against the ERDF and the ESF at the second reading of the draft budget and to ensure on that occasion that the amounts necessary to comply with the commitments arising out of the accession negotiations in respect of [Spain and Portugal] are made available to the countries concerned, taking into account the repetition of the commitment appropriations and payment appropriations entered in the 1985 budget for the Ten’. The explanatory memorandum goes on to say that in carrying out its own task the Council also examined the ‘complex’ issue of the cost of the past and was persuaded that the solution of that problem would have to be found by both arms of the budgetary authority ‘together’ and would perforce be ‘spread over a number of financial years’. It had therefore given the Presidency an exploratory brief ‘to look into the matter with the Commission in cognizance of the views [of the Parliament] and to work out the broad lines of a solution’. (Draft general budget of the European Communities for the financial year 1986 established by the Council on 17 and 18 September 1985 in Luxembourg, Vol. 7, Council Explanatory Memorandum, Doc. 9336/85 (Budget 12), pp. 9 and 10). Fourth phase. When it set about examining, on its first reading, the Council's draft, the Parliament was aware of the serious limitations placed on its powers of initiative, but also of the responsibility which it would have to assume. According to the Commission's calculations the margin for manoeuvre (namely the possible increase in NCE as compared with the Council's draft budget) amounted to 294 m ECU for commitments and 217 m ECU for payments and so, apart from the possibility of exceeding the maximum rate, it would be possible to increase NCE only by 882 and 652 m ECU respectively. On the other hand, disturbing prospects emerged from a note which the Directorate-General of Budgets had drawn up on 16 October 1985. ‘Il résulte du tableau’, it was stated in that note, ‘que les crédits du projet... ne permettent même pas d'assurer les besoins nécessaires pour la poursuite des politiques existantes (y compris le poids du passé normal) et le lancement des nouvelles actions et que, par conséquent, le poids du passé excessif et les dépenses relatives à l'élargissement ne sont pas couverts’. The debate on the budget took place in plenary session on 9 October and 11 to 12 November in the presence of the President of the Council, Mr Juncker, and Commissioner Christopherson. In view of the light which that debate sheds on the arguments of the parties it is appropriate to summarize it in some detail. Explaining the thinking behind the document drawn up by his own institution, Mr Juncker pointed first of all to its still incomplete ‘accession’ component and to the Council's awareness ‘that this was but a first step’. However, he energetically defended the decision to assign to the two large structural Funds everything that fell within the 7.1% limit. ‘It is not illegal’, he said, ‘to respect the maximum rate during the present phase of the ... procedure. It is not illegal for the President of the Council to note the absence of the qualified majority required ... in order to fix a new rate. It is not illegal for the Council to indicate the position it will have to take at its second reading’ (Official Journal, Annex No 2-330, p. 119). Commissioner Christophersen's intervention was of an altogether different tenor. The Council's choices, he stated, left two major problems unresolved: how to finance the enlargement and how to absorb the cost of the past. The Treaty of Accession obliged us to honour the economic commitments we had undertaken. By reducing the Commission's figures by over 700 m ECU, the Council had ‘ignored’ these commitments; and it was only to be hoped that the Council was sincere when it declared itself ready to eliminate at its second reading this ‘unreasonableness’vis-à-vis the new Member States. As regards the cost of the past, the level at which the draft budget fixed the payment appropriations might have a drastic impact on the activity of the structural Funds. If those figures were approved, then, for example, ‘the Social Fund will by and large have to stop operating before we are halfway into 1986’ (Official Journal, Annex No 2-330, pp. 120 and 121). No less harsh was the criticism which came from the members' benches: some of this criticism was methodological in nature (in establishing a draft ‘plus a series of intentions’ to be given effect on the second reading, it was said, the Council had attempted to ‘reduce Parliament's first reading to a charade’: Messrs Fich and Van der Wring, Official Journal, Annex No 2-330, p. 123, and Annex No 2-332, p. 25); other criticism was directed to the matters touched on by Commissioner Christophersen. The provision on the maximum rate, asserted in particular Mr Fich, applied in ‘comparable situations’ and that was not the case ‘when we are changing from 10 to 12 countries! ...It is obvious that the figures in the Community — the gross national products — will rise [by] about 9% and inflation has to be added to that. [So,] just to maintain the present level, we would get an increase of [around] 16%, which is far from the rate calculated in purely mathematical terms on the basis of Article 203’ (Official Journal, Annex No 2-332, p. 123). The commitments of the past, added Mr Christodoulou, were to be regarded as ‘additional expenditure., beyond the ceiling, since they are quite unrelated to the current and regular annual increases of the ceiling specified in Article 203’ (Official Journal, Annex No 2-332, p. 11). At the session on 14 November the votes were taken which saw NCE rise by 1764 m ECU in respect of commitments and by 1784 m ECU in respect of payments. In absolute figures, that expenditure rose by 10185 and 8132 m ECU, thus remaining about 6.3% lower than the expenditure appearing in the preliminary draft, whilst its rate of increase over the 1985 base was equivalent to 35.6% (commitments) and 27.1% (payments). By way of a gloss on its own amendments, the Parliament approved a resolution which abounded in criticisms of the Council. In particular it was deplored that by applying ‘its internal rules’ the Council had ‘not given a complete first reading’, had submitted to the Parliament ‘a truncated draft budget’ and had ‘acted in breach ... of the Treaty’. It was also found unacceptable that, contrary to Article 199 and the provisions on the structural Funds, ‘the Council did not enter all expenditure in the budget’ and that ‘neither the expenditure for an enlarged Community nor appropriations for the contractual obligations for which payment has fallen due were ... taken into account’ (paragraphs 10 and 11). Fifth phase. At the second reading (26 to 27 November) the Council approved supplementary appropriations for the enlargement equal to 500 m ECU in respect of commitments and 321 m ECU in respect of payments. It also asked the Commission to submit in 1986 an amending budget for the purpose of realizing the objectives which it had set when it proposed, in the preliminary draft budget, a reserve of 250 m ECU in CE. As regards the cost of the past the Council then fixed an amount of 400 m ECU, 196 m ECU of which were for the ERDF and 204 m ECU for the Social Fund. In deciding to enter these sums it declared itself in favour of spacing out the absorption of the cost of the past over the following financial years. It stated, however, that the period to be prescribed for that purpose ‘is longer than that envisaged by the Commission’ and requested the latter to ‘exercise maximum flexibility... in order to ensure smooth operation’ of the structural Funds. In its appraisal of the Parliament's amendments the Council adhered to a precise criterion: that is to say, it decided that, since both parties were obliged to assume the same responsibilities, a proportion of the expenditure for the enlargement and for the elimination of the cost of the past should be borne by the Parliament's margin for manoeuvre. The upshot was that the amendments were accepted in the sum of 121.9 m ECU for commitments and of 100 m ECU for payments (Draft general budget of the European Communities for the financial year 1986 with amendments and proposed modifications, Introduction, Doc. No 1, 10773/85 (Budget 14)). In absolute figures, the amount of NCE which resulted from these decisions came to 9278 and 7254 m ECU respectively. It was thus 20% lower than the corresponding sum in the Commission's preliminary draft budget. With this there came to an end a stage in the procedure which would carry decisive weight in the final negotiations between the two authorities. In conformity with the results of that stage the Council proposed to the Parliament in a letter dated 29 November 1985 that for the 1986 NCE the following maximum rates of increase over the 1985 base should be fixed: 20.5% for payment appropriations and 14.63% for commitment appropriations. Sixth phase. The Parliament devoted its sessions on 10 and 12 December to its second reading. The first speech was again made by President Juncker and, not surprisingly, exhibited all the marks of a harangue. This time, he said, let there be no talk of mistakes on our part: the Council has respected the commitments it has entered into on the matter of the enlargement, even undertaking to examine a draft supplementary budget, and has earmarked the appropriations requested by the Commission for the Social and Regional Funds. It was undeniable, replied Commissioner Christophersen, that Juncker's peroration was at least in part to the point. Distancing itself from the thinking which had guided it at the first reading, the Council had in fact taken ‘a step in the right direction, particularly on the question of the enlargement’. The expenditure for this was in fact largely covered by the appropriations decided on at the second reading (Official Journal, Annex No 2-333, p. 41). For all that, added the Vice-President of the Commission, the text referred back to the Parliament did not satisfy the Commission. Although it had recognized for the first time that there was a problem of the cost of the past, the Council was in fact far from having resolved it. To cover that cost there was still a ‘shortfall [of] about 900 m ECU’. Instead the Council has inserted a declaration, which was besides highly questionable since the very narrow margins offered by the rules of the Social Fund would make it difficult for the Commission to be ‘flexible’ in its administration, as was desired of it. The Commission was therefore counting on the Parliament: it was for the Parliament to make the ‘effort’ needed ‘to arrive at a budget which is better and clearer than the one prepared by [the] Council... ’ (Official Journal, Annex No 2-333, pp. 41 and 42). So meagre and repetitive was the ensuing Parliamentary debate that it is not worth dealing with it. The time for speeches was, in any event, over and the far more exciting time for the negotiations on the increase in the maximum rate was beginning. Those negotiations took place in one hectic day: 11 December. The first move was made by the Parliament which proposed that the appropriations decided on at the Council's second reading should be increased by an amount of 569 m ECU for NCE, but that offer was rejected. The Council instead asked its President to negotiate personally with the other party, but stipulated that he must keep within the margin for manoeuvre provided for in the fourth subparagraph of paragraph (9). Convinced that he could not offer the Parliament something which was ‘its by right’, Juncker rejected the mandate. The stipulation was then lifted. To the representatives of the Assembly, who would have to be in possession of a mandate to arrive at an agreement, Juncker was free to make all such counterproposals as he thought fit. The Council would then evaluate their reply. The figures submitted by Juncker are known: to the appropriations decided on by the Council there would be added 242 m ECU, including the margin for manoeuvre, for payments and 196 m ECU for commitments, with an increase in the maximum rate equivalent to 24.46% and 17.02% respectively. It was a step forward: but not to the liking of the Parliament or the Council. The latter, indeed, decided that, should the negotiations fail, its proposal would be reduced to the ceiling — 20.5% — established at the second reading. The situation was hardly encouraging. Juncker, however, held firm and during the night obtained for the line he had taken the votes of nine out of the 10 governments. Agreeing to a request by the Parliament's representatives, the Council also approved a joint declaration in which the two authorities undertook to guarantee ‘the necessary... resources to ensure the ... normal operation of the structural Funds in 1986’; however, almost as if to offset that concession, it then repeated its own views on the cost of the past and proposed to the Assembly to eliminate the effects thereof on the volume of NCE for future financial years (Official Journal, Annex No 2-333, pp. 241 and 242). At this point, events moved swiftly. The Parliament decided to raise the stakes and on 12 December adopted a resolution the most important passage of which may be summarized as follows: the exceptional expenditure which the Community would have to meet in 1986 in order to honour the commitments related to the enlargement and to provide for the cost of the past ‘have no equivalent of the same nature in the 1985 budget’. It concluded that ‘this expenditure is not subject to the Treaty provisions’ concerning the maximum rate of increase in NCE and that therefore ‘the procedure laid down in Article 203 (9) ... is not applicable in the present instance’. The Parliament therefore had the right and/or duty to amend the draft budget once again. Words were then followed by action. The amendments were voted and NCE increased by 492 ECU (19.53%) for commitment appropriations and by 563 in ECU (29.73%) for payment appropriations. When he learned of this, President Juncker made the following statement: ‘I have noted the vote by Parliament which has rejected the proposals I made on behalf of the Council. The proposal... was conditional. The Council accordingly reverts to the position it adopted at the second reading on 26 and 27 November’ (Official Journal, Annex No 2-333, p. 246). Seventh phase. On 18 December the President of the Parliament declared, pursuant to Article 203 (7), that the budgetary procedure was completed and that the general budget was finally adopted. He informed the Council of this by registered letter of 19 December which reached the Council four days later.