Judgment of the Court (First Chamber) of 11 March 1982. - Vincent Grogan v Commission of the European Communities. - Former official - Rates of exchange for calculation of pension. - Case 127/80.



European Court reports 1982 Page 00869



Summary

Parties

Subject of the case

Grounds

Decision on costs

Operative part



Keywords

OFFICIALS - PENSIONS - DETERMINATION OF PENSION RIGHTS - PAYMENT OF BENEFITS - DISTINCTION - AMOUNT OF BENEFITS AFFECTED BY EXCHANGE RATES AND WEIGHTINGS - NO ENCROACHMENT UPON PENSION RIGHTS

( STAFF REGULATIONS OF OFFICIALS , ANNEX VIII , CHAPTER 2 AND ARTICLES 45 AND 46 )

Summary

THE PROVISIONS OF ANNEX VIII TO THE STAFF REGULATIONS DRAW A CLEAR DISTINCTION BETWEEN THE DETERMINATION OF ' ' PENSION RIGHTS ' ' COVERED BY CHAPTER 2 OF THE ANNEX AND THE ' ' PAYMENT OF BENEFITS ' ' GOVERNED BY ARTICLES 45 AND 46 OF THE ANNEX . ALTHOUGH CHANGES IN THE AMOUNTS ACTUALLY PAID TO THE PENSIONER WHICH WERE SOLELY DUE TO THE EFFECT OF THE RATES OF EXCHANGE AND THE WEIGHTINGS AFFECTED THE PAYMENT OF BENEFITS UNDER ARTICLES 45 AND 46 , THEY DID NOT ENCROACH UPON THE PENSION RIGHTS AS DETERMINED IN ACCORDANCE WITH CHAPTER 2 OF THE ANNEX .

Parties

IN CASE 127/80

VINCENT GROGAN , A FORMER OFFICIAL OF THE COMMISSION OF THE EUROPEAN COMMUNITIES , RESIDING IN DUBLIN , REPRESENTED BY GERALD FITZGERALD , SOLICITOR IN DUBLIN , WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE CHAMBERS OF JEAN HOSS , 15 COTE D ' EICH ,

APPLICANT ,

V

COMMISSION OF THE EUROPEAN COMMUNITIES , REPRESENTED BY ITS LEGAL ADVISER , ANTHONY MCCLELLAN , ACTING AS AGENT , ASSISTED BY DANIEL JACOB OF THE BRUSSELS BAR , WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF ITS LEGAL ADVISER , MARIO CERVINO , JEAN MONNET BUILDING , KIRCHBERG ,

DEFENDANT ,

Subject of the case

APPLICATION FOR THE ANNULMENT OF THE COMMISSION ' S IMPLIED DECISION REJECTING THE COMPLAINT LODGED BY THE APPLICANT UNDER ARTICLE 90 ( 2 ) OF THE STAFF REGULATIONS OF OFFICIALS AND CONCERNING THE APPLICATION TO HIM OF COUNCIL REGULATIONS ( EURATOM , ECSC , EEC ) NOS 3085/78 AND 3086/78 OF 21 DECEMBER 1978 AMENDING THE STAFF REGULATIONS OF OFFICIALS AND THE CONDITIONS OF EMPLOYMENT OF OTHER SERVANTS OF THE EUROPEAN COMMUNITIES WITH REFERENCE TO THE MONETARY PARITIES TO BE USED AND THE WEIGHTINGS APPLICABLE TO THE REMUNERATION AND PENSIONS OF OFFICIALS AND OTHER SERVANTS OF THE EUROPEAN COMMUNITIES ( OFFICIAL JOURNAL 1978 L 369 ),

Grounds

1 BY AN APPLICATION LODGED AT THE COURT REGISTRY ON 27 MAY 1980 MR GROGAN , A FORMER OFFICIAL OF THE COMMISSION OF THE EUROPEAN COMMUNITIES , BROUGHT AN ACTION UNDER ARTICLE 91 OF THE STAFF REGULATIONS OF OFFICIALS FOR THE ANNULMENT OF THE COMMISSION ' S DECISION REDUCING AS FROM OCTOBER 1979 THE MONTHLY PENSION PAYABLE TO THE APPLICANT AND OF THE IMPLIED REJECTION OF THE COMPLAINT WHICH HE SUBMITTED AGAINST THAT DECISION .

2 IN SUPPORT OF HIS ACTION THE APPLICANT CLAIMS THAT COUNCIL REGULATION ( EURATOM , ECSC , EEC ) NO 3085/78 OF 21 DECEMBER 1978 ( OFFICIAL JOURNAL 1978 L 369 , P . 6 ), WHICH AMENDED THE PROVISIONS OF THE STAFF REGULATIONS WITH REFERENCE TO THE MONETARY PARITIES TO BE USED , AND COUNCIL REGULATION ( EURATOM , ECSC , EEC ) NO 3086/78 OF THE SAME DATE ADJUSTING THE WEIGHTINGS APPLICABLE TO THE REMUNERATION AND PENSIONS OF OFFICIALS AND OTHER SERVANTS OF THE EUROPEAN COMMUNITIES FOLLOWING THE AMENDMENT OF THE PROVISIONS OF THE STAFF REGULATIONS CONCERNING THE MONETARY PARITIES TO BE USED IN IMPLEMENTING THE STAFF REGULATIONS ( OFFICIAL JOURNAL 1978 L 369 , P . 8 ) ARE UNLAWFUL .

3 THE APPLICANT , WHO WAS RETIRED IN 1975 AFTER HIS POST HAD BEEN ABOLISHED IN THE INTERESTS OF THE SERVICE IN ACCORDANCE WITH ARTICLE 50 OF THE STAFF REGULATIONS , IS IN RECEIPT OF A PENSION UNDER ARTICLE 77 OF THE STAFF REGULATIONS . BY VIRTUE OF THE THIRD PARAGRAPH OF ARTICLE 45 OF ANNEX VIII TO THE STAFF REGULATIONS , HE COULD ELECT TO HAVE HIS PENSION PAID IN THE CURRENCY EITHER OF HIS COUNTRY OF ORIGIN OR OF HIS COUNTRY OF RESIDENCE OR OF THE COUNTRY WHERE THE INSTITUTION TO WHICH HE BELONGED BEFORE HIS RETIREMENT HAD ITS SEAT . THE APPLICANT , WHO TOOK UP RESIDENCE IN HIS COUNTRY OF ORIGIN , NAMELY IRELAND , OPTED TO HAVE HIS BENEFITS PAID IN THE CURRENCY OF THE COUNTRY WHERE THE COMMISSION HAD ITS PROVISIONAL SEAT , THAT IS TO SAY IN BELGIAN FRANCS .

4 UNDER ARTICLE 82 ( 1 ) OF THE STAFF REGULATIONS PENSIONS ARE TO BE WEIGHTED IN THE MANNER PROVIDED FOR IN ARTICLES 64 AND 65 ( 2 ) OF THE STAFF REGULATIONS FOR THE COUNTRY OF THE COMMUNITIES WHERE THE PERSON ENTITLED TO THE PENSION DECLARES HIS HOME TO BE . PAYMENT OF SUCH PENSIONS IS TO BE EFFECTED IN ACCORDANCE WITH THE TERMS CONTAINED IN ARTICLE 63 IN RESPECT OF PAYMENT OF REMUNERATION .

5 IN THE FORM WHICH THEY TOOK UNTIL THE END OF 1978 , ARTICLES 63 AND 64 OF THE STAFF REGULATIONS PROVIDED AS FOLLOWS :

ARTICLE 63 : ,, AN OFFICIAL ' S REMUNERATION SHALL BE EXPRESSED IN BELGIAN FRANCS .

IT SHALL BE PAID IN THE CURRENCY OF THE COUNTRY IN WHICH THE OFFICIAL PERFORMS HIS DUTIES .

REMUNERATION PAID IN A CURRENCY OTHER THAN BELGIAN FRANCS SHALL BE CALCULATED ON THE BASIS OF THE PAR VALUES ACCEPTED BY THE INTERNATIONAL MONETARY FUND , AND IN FORCE ON 1 JANUARY 1965 . ' '

ARTICLE 64 : ' ' AN OFFICIAL ' S REMUNERATION EXPRESSED IN BELGIAN FRANCS SHALL . . . BE WEIGHTED AT A RATE ABOVE , BELOW OR EQUAL TO 100% , DEPENDING ON LIVING CONDITIONS IN THE VARIOUS PLACES OF EMPLOYMENT .

. . . THE WEIGHTING APPLICABLE TO THE REMUNERATION OF OFFICIALS EMPLOYED AT THE PROVISIONAL SEATS OF THE COMMUNITIES SHALL BE EQUAL TO 100% AS AT 1 JANUARY 1962 . ' '

6 SINCE 1971 THE CURRENCIES OF CERTAIN MEMBER STATES , INCLUDING THE IRISH POUND , HAVE SUFFERED INCREASINGLY LARGE REDUCTIONS IN VALUE IN RELATION TO THEIR VALUES IN 1965 . DURING A FIRST PERIOD EXTENDING UNTIL 1978 THE COUNCIL DID NOT ALTER THE EXCHANGE RATES LAID DOWN BY ARTICLE 63 OF THE STAFF REGULATIONS . HOWEVER , IN ORDER TO MAINTAIN THE PURCHASING POWER OF PENSIONS PAID IN CURRENCIES WHICH HAD FALLEN IN VALUE , IT INCREASED THE WEIGHTINGS REFERRED TO IN ARTICLE 64 OF THE STAFF REGULATIONS FOR THE COUNTRIES CONCERNED .

7 THE RESULT WAS THAT IN THE CASE OF PENSIONERS RESIDING IN IRELAND WHO HAD OPTED TO HAVE THEIR BENEFITS PAID IN IRISH POUNDS , THE REDUCTION IN THE PURCHASING POWER OF THE AMOUNTS CALCULATED ON THE BASIS OF THE FORMER PARITIES WAS OFFSET BY THE INCREASE IN THE WEIGHTING APPLICABLE TO IRELAND . THOSE PENSIONERS WHO , LIKE THE APPLICANT , HAD CHOSEN TO HAVE THEIR BENEFITS PAID IN BELGIAN FRANCS , THE AMOUNT OF WHICH COULD BE CONVERTED INTO IRISH POUNDS AT THE RATE OF EXCHANGE PREVAILING ON THE DAY , AND WHO THEREFORE DID NOT INCUR A SIMILAR RISK OF SUSTAINING A REDUCTION IN PURCHASING POWER , NEVERTHELESS HAD THEIR PENSIONS ADJUSTED BY THE SAME INCREASE IN THE WEIGHTING , SINCE THE WEIGHTING WAS OF GENERAL APPLICATION .

8 THUS , BETWEEN 1973 , THE DATE OF IRELAND ' S ACCESSION TO THE COMMUNITIES , AND 1978 , THE AMOUNTS ACTUALLY PAID TO PENSIONERS WHO RESIDED IN IRELAND BUT HAD CHOSEN TO HAVE THEIR BENEFITS PAID IN BELGIAN FRANCS ROSE PROGRESSIVELY OWING TO THE MERE FACT THAT THEY WERE ADJUSTED BY THE INCREASED WEIGHTING AND WERE ULTIMATELY MUCH HIGHER THAN THOSE PAID TO PENSIONERS WHO RESIDED IN IRELAND AND HAD OPTED FOR PAYMENT IN IRISH POUNDS .

9 REGULATION NO 3085/78 PUT AN END TO THAT SYSTEM BY REPLACING THE FORMER PARITIES BY THE APPLICATION OF UPDATED RATES OF EXCHANGE . AT THE SAME TIME REGULATION NO 3086/78 RESTORED THE WEIGHTINGS TO THEIR ORIGINAL FUNCTION OF ALLEVIATING THE EFFECTS OF THE DIFFERENCES IN LIVING CONDITIONS BY COMPARISON WITH THOSE EXISTING IN THE COUNTRIES IN WHICH THE PROVISIONAL SEATS OF THE COMMUNITIES WERE SITUATED . ON THAT OCCASION THE WEIGHTING APPLICABLE TO IRELAND WAS SUBSTANTIALLY REDUCED .

10 REGULATIONS NOS 3085/78 AND 3086/78 APPLIED FROM 1 APRIL 1979 . HOWEVER , THE THIRD PARAGRAPH OF ARTICLE 4 OF REGULATION NO 3085/78 PROVIDES AS FOLLOWS :

' ' HOWEVER , FOR PENSIONS AND ALLOWANCES OF WHICH THE NET AMOUNT BECOMES LESS THAN THAT UNDER THE EXISTING ARRANGEMENTS , THE REGULATION SHALL ONLY APPLY FROM 1 OCTOBER 1979 . FROM THAT DATE THE DIFFERENCE BETWEEN THE NET AMOUNTS RESULTING FROM THE IMPLEMENTATION OF THIS REGULATION AND THOSE RECEIVED IN SEPTEMBER 1979 SHALL BE REDUCED BY ONE TENTH PER MONTH . ' '

11 ON 23 OCTOBER 1979 THE COMMISSION INFORMED THE APPLICANT THAT THE NEW SYSTEM WOULD BE APPLIED TO HIS PENSION PAYMENTS FROM 1 OCTOBER 1979 . THE NET AMOUNT OF THE BENEFIT , WHICH CAME TO BFR 30 145 IN SEPTEMBER 1979 , WOULD BE REDUCED TO BFR 13 080 . HOWEVER , IN ACCORDANCE WITH THE THIRD PARAGRAPH OF ARTICLE 4 OF REGULATION NO 3085/78 CITED ABOVE , THE REDUCTION WOULD BE MADE AT THE RATE OF ONE TENTH PER MONTH FROM OCTOBER 1979 UNTIL JULY 1980 .

12 SINCE HIS COMPLAINT AGAINST THAT DECISION , WHICH WAS LODGED ON 12 NOVEMBER 1979 , EVOKED NO RESPONSE WITHIN THE PERIOD OF FOUR MONTHS LAID DOWN BY THE STAFF REGULATIONS , THE APPLICANT BROUGHT THIS ACTION ON 27 MAY 1980 . ON 15 JULY 1980 THE COMMISSION NOTIFIED HIM OF ITS DECISION TO REJECT HIS COMPLAINT .

THE FIRST SUBMISSION ( VESTED RIGHTS )

13 THE APPLICANT CLAIMS FIRST THAT REGULATIONS NOS 3085/78 AND 3086/78 AND THE CONTESTED DECISION APPLYING THEM TO HIM COULD NOT DEPRIVE HIM OF A VESTED RIGHT TO A PENSION DETERMINED IN ACCORDANCE WITH ARTICLE 77 OF THE STAFF REGULATIONS . THE VESTED NATURE OF SUCH A RIGHT ARISES FROM THE FACT THAT THE COMMUNITY PENSION SCHEME IS A CONTRIBUTORY ONE , THE RIGHT TO A PENSION BEING PROPORTIONATE TO THE CONTRIBUTIONS PAID . AFTER THE EMPLOYER/EMPLOYEE RELATIONSHIP BETWEEN THE APPLICANT AND THE COMMISSION WAS TERMINATED IN 1975 WHEN THE COMMISSION ABOLISHED HIS POST IN THE INTERESTS OF THE SERVICE , THE AMOUNT OF HIS PENSION COULD BE ALTERED ONLY IN ACCORDANCE WITH THE PROVISIONS OF THE STAFF REGULATIONS ALREADY APPLICABLE AT THAT TIME .

14 IT SHOULD BE OBSERVED IN THAT REGARD THAT THE PROVISIONS OF ANNEX VIII TO THE STAFF REGULATIONS DRAW A CLEAR DISTINCTION BETWEEN THE DETERMINATION OF ' ' PENSION RIGHTS ' ' COVERED BY CHAPTER 2 OF THE ANNEX AND THE ' ' PAYMENT OF BENEFITS ' ' GOVERNED BY ARTICLES 45 AND 46 OF THE ANNEX . THE ARGUMENTS PUT FORWARD BY THE APPLICANT ARE BASED ON THE ASSUMPTION THAT HIS ' ' PENSION RIGHTS ' ' WITHIN THE MEANING OF THE STAFF REGULATIONS WERE REDUCED .

15 THE CHANGES WHICH TOOK PLACE IN THE AMOUNTS ACTUALLY PAID TO THE APPLICANT WERE DUE TO THE EFFECT OF THE RATES OF EXCHANGE AND THE WEIGHTINGS . WHILST THE CHANGES AFFECTED THE PAYMENT OF BENEFITS UNDER ARTICLES 45 AND 46 OF ANNEX VIII , THEY DID NOT HAVE THE EFFECT OF ENCROACHING UPON THE APPLICANT ' S PENSION RIGHTS AS DETERMINED IN ACCORDANCE WITH CHAPTER 2 OF ANNEX VIII , WHICH CONTINUE TO SERVE AS THE BASIS FOR THE CALCULATION OF THE BENEFITS ACTUALLY PAID .

16 IT FOLLOWS THAT THIS SUBMISSION IS INAPPOSITE AND THAT IT IS THEREFORE UNNECESSARY TO CONSIDER IT .

THE SECOND SUBMISSION ( THE LAWFULNESS OF THE WEIGHTINGS )

17 THE APPLICANT SUBMITS NEXT THAT REGULATION NO 3086/78 IS UNLAWFUL INASMUCH AS IT ALTERED THE WEIGHTINGS FOR REASONS OTHER THAN THOSE WHICH MIGHT JUSTIFY SUCH ACTION UNDER THE TERMS OF ARTICLES 64 AND 65 ( 2 ) OF THE STAFF REGULATIONS .

18 THE COMMISSION PUT FORWARD TWO ARGUMENTS IN DEFENCE OF THE LAWFULNESS OF THE WEIGHTINGS LAID DOWN BY REGULATION NO 3086/78 . THE RESULT OF MAINTAINING THE FORMER SYSTEM WOULD HAVE BEEN TO PERPETUATE WITHOUT JUSTIFICATION THE INCREASINGLY MANIFEST INEQUALITY OF TWO CATEGORIES OF PENSIONERS , WHICH STEMMED FROM THE CHOICE WHICH THEY MADE PURSUANT TO ARTICLE 45 OF ANNEX VIII TO BE PAID EITHER IN BELGIAN FRANCS OR IN THE CURRENCY OF THEIR COUNTRY OF RESIDENCE . MOREOVER , THE EFFECT OF THE NEW SYSTEM SET UP IN PARTICULAR BY REGULATIONS NOS 3085/78 AND 3086/78 WAS SPECIFICALLY TO RESTORE THE WEIGHTINGS TO THE FUNCTIONS ASSIGNED TO THEM BY THE STAFF REGULATIONS RATHER THAN TO USE THEM TO OFFSET FLUCTUATIONS IN THE RATES OF EXCHANGE .

19 THOSE ARGUMENTS PUT FORWARD BY THE COMMISSION MUST BE ACCEPTED . HOWEVER , THEY RAISE A DIFFERENT PROBLEM ON WHICH THE COMMISSION DID NOT EXPRESS ITS VIEWS IN THE COURSE OF THESE PROCEEDINGS , NAMELY WHETHER THE PREVIOUS USE OF THE WEIGHTINGS AS AN INSTRUMENT OF MONETARY POLICY DURING THE PERIOD BEFORE REGULATION NO 3086/78 WAS PUT INTO EFFECT IS TO BE REGARDED AS HAVING BEEN IN CONFORMITY WITH THE STAFF REGULATIONS .

20 IT SHOULD BE RECALLED THAT ARTICLE 64 OF THE STAFF REGULATIONS PROVIDES THAT THE WEIGHTINGS ARE TO BE DETERMINED ACCORDING TO ' ' LIVING CONDITIONS IN THE VARIOUS PLACES OF EMPLOYMENT ' ' . ARTICLE 65 ( 2 ) OF THE STAFF REGULATIONS PROVIDES THAT IN THE EVENT OF ' ' A SUBSTANTIAL CHANGE IN THE COST OF LIVING ' ' THE COUNCIL MAY ADJUST THE WEIGHTINGS .

21 THE GRADUAL INCREASE IN THE WEIGHTING APPLICABLE TO IRELAND WHICH OCCURRED DURING THE PERIOD FROM THE TIME OF ACCESSION UNTIL 1979 WAS INTENDED TO ALLOW THE FIXED PAR VALUES ACCEPTED BY THE INTERNATIONAL MONETARY FUND IN 1965 TO BE MAINTAINED WITHOUT PREJUDICE TO THE PURCHASING POWER OF THE BENEFITS PAID TO FORMER COMMUNITY SERVANTS RESIDING IN IRELAND WHOSE PENSIONS HAD TO BE CONVERTED INTO IRISH POUNDS IN ACCORDANCE WITH ARTICLE 63 OF THE STAFF REGULATIONS . WHILST THE OBJECTIVE OF NOT PASSING THE EFFECT OF THE MAINTENANCE OF FIXED EXCHANGE RATES IN TIMES OF CURRENCY DISTURBANCES ON TO PENSIONERS RESIDING IN WEAK CURRENCY COUNTRIES IS WHOLLY WITHIN THE SPIRIT OF THE STAFF REGULATIONS , IT DOES NOT NECESSARILY FOLLOW THAT THE PROVISIONS OF THE STAFF REGULATIONS PERMITTED THE USE OF THE WEIGHTINGS AS AN INSTRUMENT OF MONETARY POLICY .

22 ACCORDING TO THE COMMISSION , SUCH USE OF THE WEIGHTINGS WAS JUSTIFIED AS A TEMPORARY EXPEDIENT INTENDED TO OFFSET THE EFFECTS OF THE PARITIES FIXED IN 1965 PENDING AN ALTERATION OF THE RATES OF EXCHANGE LAID DOWN BY ARTICLE 63 OF THE STAFF REGULATIONS .

23 THE COURT HAS ALREADY HELD IN ANOTHER CONTEXT IN ITS JUDGMENT OF 24 OCTOBER 1973 IN CASE 9/73 SCHLUTER V HAUPTZOLLAMT LORRACH ( 1973 ) ECR 1135 THAT THE COUNCIL MAY BE ENTITLED TO HAVE RECOURSE TO A TEMPORARY EXPEDIENT WHEN CONFRONTED WITH A SITUATION CHARACTERIZED BY THE ABSENCE OF ANY ADEQUATE PROVISION FOR URGENTLY COUNTERACTING THE EFFECTS OF SUDDEN EVENTS WHICH MAY GIVE RISE TO A SERIOUS SITUATION , PARTICULARLY WHERE THE MEASURES TO BE ADOPTED RELATE TO AN AREA INTIMATELY CONNECTED WITH THE MONETARY POLICIES OF MEMBER STATES , THE EFFECTS OF WHICH THEY ARE PARTIALLY TO OFFSET . HOWEVER , THE COURT ADDED THAT SUCH A STATE OF AFFAIRS MAY BE ONLY TEMPORARY , SINCE THE LEGAL BASIS FOR THE MEASURES IN QUESTION MUST EVENTUALLY BE FOUND IN THE APPROPRIATE PROVISIONS OF COMMUNITY LAW .

24 IN THIS CASE THE ALTERATION OF THE EXCHANGE RATES AND THE CORRESPONDING ADJUSTMENT OF THE WEIGHTINGS DID NOT OCCUR UNTIL THE END OF 1978 . THUS THE TEMPORARY MEASURES GOVERNED THE SITUATION OF PENSIONERS RESIDING IN WEAK CURRENCY COUNTRIES FOR A PERIOD OF APPROXIMATELY SEVEN YEARS .

25 HOWEVER , IT MUST BE ACKNOWLEDGED THAT THE PERIOD WAS CHARACTERIZED BY UNCERTAINTIES AS TO SUBSEQUENT CURRENCY DEVELOPMENTS . IN THOSE CIRCUMSTANCES , THE COUNCIL ' S RELUCTANCE TO ADAPT COMMUNITY PROVISIONS TO THE NEW SITUATION ON THE CURRENCY MARKET COULD BE EXPLAINED BY THE DIFFICULTIES IN LAYING DOWN , NOT ONLY IN THE SPHERE OF THE STAFF REGULATIONS BUT ALSO IN OTHER SPHERES , CRITERIA ENSURING FIRM RATES OF EXCHANGE .

26 IT FOLLOWS FROM THE FOREGOING THAT THE SUBMISSION PUT FORWARD AS TO THE UNLAWFULNESS OF LAYING DOWN THE WEIGHTING APPLICABLE TO IRELAND IS UNFOUNDED .

THE THIRD SUBMISSION ( LEGITIMATE EXPECTATION )

27 THE APPLICANT CLAIMS FINALLY THAT THE REDUCTIONS IN PENSION BENEFITS PAID , MADE PURSUANT TO REGULATIONS NOS 3085/78 AND 3086/78 , WERE IN BREACH OF CERTAIN GENERAL PRINCIPLES OF LAW UPHELD BY COMMUNITY LAW . HE CLAIMS IN THAT REGARD THAT HE WAS ENTITLED TO EXPECT THE CONTINUED PAYMENT OF THE BENEFITS AWARDED TO HIM , THE LEVEL OF WHICH HAD GUIDED HIM IN CHOOSING HIS MODE OF LIVING DURING HIS YEARS OF RETIREMENT .

28 BY THAT SUBMISSION THE APPLICANT MUST BE SEEN AS CLAIMING THAT THERE HAS BEEN A BREACH OF THE PRINCIPLE OF THE PROTECTION OF THE LEGITIMATE EXPECTATION , TO WHICH COMMUNITY SERVANTS ARE ENTITLED , THAT COMMITMENTS WHICH THE INSTITUTIONS HAVE ENTERED INTO WILL BE MET . DURING THE ORAL PROCEDURE THE APPLICANT STATED THAT THE SUBMISSION RELATED BOTH TO THE NEW SYSTEM SET UP BY REGULATIONS NOS 3085/78 AND 3086/78 AND TO THE ARRANGEMENTS FOR ITS INTRODUCTION .

29 AS HAS BEEN EXPLAINED ABOVE , THE NEW SYSTEM WAS INTRODUCED IN ORDER TO RECTIFY A SITUATION WHICH HAD DETERIORATED AS A RESULT OF FLUCTUATIONS IN THE RATES OF EXCHANGE AND THE PROLONGED APPLICATION OF TEMPORARY EXPEDIENTS DESIGNED TO CONTEND WITH THOSE FLUCTUATIONS . AT THE SAME TIME , IT ENABLED THE VARIOUS CATEGORIES OF PENSIONERS RESIDING IN WEAK CURRENCY COUNTRIES TO BE RESTORED TO A SITUATION IN WHICH THEY WOULD BE ASSURED OF EQUAL TREATMENT .

30 SINCE NONE OF THE COMMUNITY INSTITUTIONS HAD COMMITTED THEMSELVES TO MAINTAINING A SITUATION ARISING FROM THE APPLICATION OF THOSE TEMPORARY EXPEDIENTS WHICH FAVOURED A PARTICULAR CATEGORY OF PENSIONERS , THE APPLICANT ' S SUBMISSION MUST BE REJECTED IN SO FAR AS IT RELATES TO THE ACTUAL INTRODUCTION OF THE NEW SYSTEM .

31 WITH REGARD TO THE ARRANGEMENTS FOR ITS INTRODUCTION , IT SHOULD BE RECALLED THAT IT WAS THE COUNCIL ' S RELUCTANCE TO AMEND THE PROVISIONS OF THE STAFF REGULATIONS CONCERNING THE RATES OF EXCHANGE WHICH CAUSED THE PROGRESSIVE INCREASE IN THE BENEFITS DUE TO THE CATEGORY OF PENSIONERS TO WHICH THE APPLICANT BELONGS . THAT INCREASE OCCURRED OVER A PERIOD OF ABOUT SEVEN YEARS AND YET THE COUNCIL DECIDED , BY INCORPORATING THE THIRD PARAGRAPH OF ARTICLE 4 OF REGULATION NO 3085/78 , TO MAKE PENSIONERS BEAR THE LOSS OF THAT INCREASE AFTER A RELATIVELY SHORT TRANSITIONAL PERIOD , A SYSTEM OF MONTHLY REDUCTIONS OVER A PERIOD OF TEN MONTHS BEING APPLIED FROM 1 OCTOBER 1979 , THAT IS TO SAY SIX MONTHS AFTER REGULATIONS NOS 3085/78 AND 3086/78 ENTERED INTO FORCE .

32 IT SHOULD BE EMPHASIZED THAT THE DETERIORATION IN THE SITUATION WHICH OCCURRED BEFORE THE ADOPTION OF REGULATIONS NOS 3085/78 AND 3086/78 WAS NOT IN ANY WAY ATTRIBUTABLE TO THE CONDUCT OF THE PENSIONERS . THE PROLONGED PERIOD OF DETERIORATION WAS DUE TO THE INACTION OF THE COUNCIL , WHICH FAILED TO RECTIFY EXCHANGE RATES WHICH NO LONGER BORE ANY RELATION TO ECONOMIC REALITY .

33 WHILST THERE MAY BE SOME EXPLANATION FOR THE COUNCIL ' S INACTION IT MUST NONE THE LESS NOT BE OVERLOOKED THAT PENSIONERS BENEFITING FROM THAT INACTION WERE ENTITLED TO EXPECT THE COUNCIL TO TAKE ACCOUNT OF THE SITUATION IN WHICH THEY HAD BEEN PLACED BY THE PROLONGED APPLICATION OF THE SYSTEM TEMPORARILY USED . THAT IS PARTICULARLY TRUE IN THE CASE OF PENSIONS , SINCE THEY ARE INTENDED TO ENSURE THAT OFFICIALS WHO HAVE LEFT THE SERVICE OF THE COMMUNITIES ENJOY AN ADEQUATE STANDARD OF LIVING .

34 IT FOLLOWS THAT AFTER FAILING TO ACT FOR A PERIOD EXTENDING OVER A NUMBER OF YEARS , THE COUNCIL COULD NOT , WITHOUT FAILING TO PROTECT PENSIONERS ' LEGITIMATE EXPECTATIONS , LAY DOWN A TRANSITIONAL PERIOD FOR THE PROGRESSIVE REDUCTION OF THE AMOUNTS PAID WHICH LASTED ONLY TEN MONTHS . A PERIOD OF AT LEAST TWICE THAT LENGTH SHOULD HAVE BEEN ENVISAGED FOR THAT PROCESS .

35 THE SUBMISSION PUT FORWARD AS TO THE FAILURE TO PROTECT LEGITIMATE EXPECTATION IS THEREFORE WELL FOUNDED IN SO FAR AS IT RELATES TO THE PERIOD OVER WHICH THE TRANSITIONAL ARRANGEMENTS INTRODUCED BY THE THIRD PARAGRAPH OF ARTICLE 4 OF REGULATION NO 3085/78 EXTENDED .

36 IT FOLLOWS THAT IN THE ABSENCE OF TRANSITIONAL ARRANGEMENTS WHICH WERE LAWFUL , THE COMMISSION WAS NOT ENTITLED TO APPLY REGULATIONS NOS 3085/78 AND 3086/78 TO THE APPLICANT AND THAT CONSEQUENTLY THE CONTESTED DECISION MUST BE ANNULLED .

37 IT IS FOR THE COMPETENT INSTITUTIONS TO ADOPT THE MEASURES NECESSARY TO REMEDY THE UNLAWFULNESS WHICH HAS BEEN ESTABLISHED AND IN PARTICULAR TO INTRODUCE WITH RETROACTIVE EFFECT SUITABLE TRANSITIONAL ARRANGEMENTS .

Decision on costs

COSTS

38 UNDER ARTICLE 69 ( 3 ) OF THE RULES OF PROCEDURE THE COURT MAY ORDER THAT THE PARTIES BEAR THEIR OWN COSTS .

Operative part

ON THOSE GROUNDS ,

THE COURT ( FIRST CHAMBER )

HEREBY :

1 . ANNULS THE COMMISSION ' S DECISION REDUCING THE APPLICANT ' S PENSION PURSUANT TO ARTICLE 4 OF COUNCIL REGULATION ( EURATOM , ECSC , EEC ) NO 3085/78 OF 21 DECEMBER 1978 ( OFFICIAL JOURNAL 1978 L 369 , P . 6 ), WHICH WAS NOTIFIED TO THE APPLICANT BY A MEMORANDUM OF 23 OCTOBER 1979 .

2.ORDERS THE PARTIES TO BEAR THEIR OWN COSTS .