1 BY APPLICATION LODGED AT THE COURT REGISTRY ON 11 FEBRUARY 1986 , THE COUNCIL OF THE EUROPEAN COMMUNITIES BROUGHT AN ACTION PURSUANT TO ARTICLE 173 OF THE EEC TREATY AND ARTICLE 146 OF THE EAEC TREATY AGAINST THE EUROPEAN PARLIAMENT FOR THE PARTIAL OR , IN THE ALTERNATIVE , TOTAL ANNULMENT OF THE GENERAL BUDGET OF THE EUROPEAN COMMUNITIES FOR THE FINANCIAL YEAR 1986 ( OFFICIAL JOURNAL L 358 ) AND ALSO FOR THE ANNULMENT OF THE ACT OF 18 DECEMBER 1985 WHEREBY THE PRESIDENT OF THE EUROPEAN PARLIAMENT DECLARED THE FINAL ADOPTION OF THAT BUDGET .
2 THE COUNCIL , AS WELL AS THE GERMAN , FRENCH AND UNITED KINGDOM GOVERNMENTS WHICH HAVE INTERVENED IN THE CASE IN SUPPORT OF ITS CONCLUSIONS , COMPLAIN IN PARTICULAR THAT THE EUROPEAN PARLIAMENT INCREASED , AS THE RESULT OF AMENDMENTS VOTED AT THE SECOND READING OF THE DRAFT BUDGET ON 12 DECEMBER 1985 , CERTAIN BUDGETARY APPROPRIATIONS IN BREACH OF THE TREATIES AND IN PARTICULAR OF ARTICLE 203 ( 9 ) OF THE EEC TREATY AND OF THE CORRESPONDING PROVISIONS OF THE EAEC AND ECSC TREATIES . THEY MAINTAIN THAT THESE INCREASES BRING ABOUT A RISE IN THE NON-COMPULSORY EXPENDITURE IN THE 1986 BUDGET , AS COMPARED WITH THE LIKE EXPENDITURE FOR THE FINANCIAL YEAR 1985 , WHICH EXCEEDS THE MAXIMUM RATE OF INCREASE FIXED IN CONFORMITY WITH ARTICLE 203 ( 9 ).
3 THE EUROPEAN PARLIAMENT ' S PRIMARY CONTENTION IS THAT THE APPLICATION IS INADMISSIBLE . IN THE ALTERNATIVE , IT CONTENDS THAT IT RESPECTED THE LETTER AND SPIRIT OF ARTICLE 203 ( 9 ) OF THE EEC TREATY . IT WAS THE COUNCIL THAT DISREGARDED THE PROVISIONS OF THE TREATIES , IN PARTICULAR THOSE OF ARTICLE 199 OF THE EEC TREATY , BY SUBMITTING TO THE PARLIAMENT A DRAFT BUDGET AND , AFTER THE PARLIAMENT ' S FIRST READING , A MODIFIED DRAFT THE ADOPTION OF WHICH WOULD HAVE RENDERED IT IMPOSSIBLE FOR THE COMMUNITIES TO MEET THEIR COMMITMENTS . ADMISSIBILITY
4 THE PARLIAMENT DENIES IN THE FIRST PLACE THAT THE COUNCIL MAY RELY ON ARTICLE 173 OF THE EEC TREATY FOR THE PURPOSES OF SEEKING THE ANNULMENT OF THE BUDGET AS AN ACT OF THE EUROPEAN PARLIAMENT . ACCORDING TO THAT INSTITUTION , ARTICLE 173 DOES NOT PROVIDE FOR A REVIEW OF THE LEGALITY OF THE ACTS OF THE EUROPEAN PARLIAMENT ANY MORE , FOR THAT MATTER , THAN IT ALLOWS THE ASSEMBLY TO CHALLENGE BEFORE THE COURT THE LEGALITY OF THE ACTS OF THE COUNCIL AND THE COMMISSION OF THE COMMUNITIES .
5 HOWEVER , IT MUST BE POINTED OUT THAT THE COURT HAS ALREADY HELD IN ITS JUDGMENT OF 23 APRIL 1986 ( CASE 294/83 PARTI ECOLOGISTE ' LES VERTS ' ( 1986 ) ECR 1339 ) THAT BY VIRTUE OF ARTICLE 173 OF THE EEC TREATY AN ACTION FOR ANNULMENT MAY BE BROUGHT AGAINST THE ACTS OF THE EUROPEAN PARLIAMENT WHICH ARE INTENDED TO HAVE LEGAL EFFECTS VIS-A-VIS THIRD PARTIES , PROVIDED THAT THE OTHER CONDITIONS LAID DOWN BY THAT ARTICLE ARE SATISFIED .
6 IN THIS REGARD , IT MUST BE NOTED THAT THE GENERAL BUDGET OF THE COMMUNITIES IS THE INSTRUMENT WHICH SETS OUT FORECASTS OF , AND AUTHORIZES IN ADVANCE , THE REVENUE AND EXPENDITURE FOR EACH YEAR . ACCORDING TO THE SECOND PARAGRAPH OF ARTICLE 199 OF THE EEC TREATY , THE REVENUE AND EXPENDITURE MUST BE IN BALANCE . IT IS FOR THE COMMISSION TO IMPLEMENT THE BUDGET , BY VIRTUE OF ARTICLE 205 , WITHIN THE LIMITS OF THE APPROPRIATIONS ALLOCATED , WHILST THE REVENUE ENTERED IN THE BUDGET DETERMINES THE LEVEL OF THE VALUE-ADDED TAX TO BE TRANSFERRED BY THE MEMBER STATES TO THE OWN RESOURCES OF THE COMMUNITIES . IT FOLLOWS THAT , ONCE THE PRESIDENT OF THE PARLIAMENT HAS MADE THE DECLARATION REFERRED TO IN ARTICLE 203 ( 7 ), THE BUDGET RANKS AMONG THE ACTS WHICH ARE CAPABLE OF PRODUCING LEGAL EFFECTS VIS-A-VIS THIRD PARTIES .
7 THE PARLIAMENT GOES ON TO MAINTAIN THAT , IN ANY EVENT , ITS PRESIDENT ' S DECLARATION , PURSUANT TO ARTICLE 203 ( 7 ) OF THE EEC TREATY , THAT THE BUDGET HAS BEEN FINALLY ADOPTED , MAY NOT BE REGARDED AS AN ACT OPEN TO CHALLENGE . THE PRESIDENT OF THE PARLIAMENT DOES NOT INTERVENE UNTIL AFTER THE CLOSE OF THE BUDGETARY PROCEDURE AND CANNOT EXERT ANY INFLUENCE ON THE OUTCOME OF THAT PROCEDURE . TO DEEM THE DECLARATION OF THE PRESIDENT OF THE PARLIAMENT TO BE AN ACT OPEN TO CHALLENGE WOULD AMOUNT , IN THOSE CIRCUMSTANCES , TO ESTABLISHING A THIRD , INDEPENDENT ARM OF THE BUDGETARY AUTHORITY , DISTINCT FROM THE TWO OTHERS , NAMELY THE COUNCIL AND THE PARLIAMENT .
8 THAT ARGUMENT MUST ALSO BE REJECTED . IT IS THE PRESIDENT OF THE PARLIAMENT WHO FORMALLY DECLARES THAT THE BUDGETARY PROCEDURE HAS BEEN BROUGHT TO A CLOSE BY THE FINAL ADOPTION OF THE BUDGET AND THUS ENDOWS THE BUDGET WITH BINDING FORCE VIS-A-VIS THE INSTITUTIONS AND THE MEMBER STATES . IN EXERCISING THAT FUNCTION , THE PRESIDENT OF THE PARLIAMENT INTERVENES BY MEANS OF A SEPARATE LEGAL ACT OF AN OBJECTIVE NATURE AT THE CONCLUSION OF A PROCEDURE CHARACTERIZED BY THE JOINT ACTION OF VARIOUS INSTITUTIONS . HE ADOPTS THAT ACT , NOT AS A DISTINCT AUTHORITY NOT PROVIDED FOR IN THE TREATY , BUT IN HIS CAPACITY AS AN ORGAN OF THE EUROPEAN PARLIAMENT .
9 FINALLY , THE PARLIAMENT SUBMITS THAT THE DELIBERATION OF THE PARLIAMENT , AT ITS SECOND READING , ON THE DRAFT MODIFIED BY THE COUNCIL IS NOT A MATTER WHICH MAY BE MADE THE SUBJECT OF AN ACTION FOR ANNULMENT .
10 IN DEVELOPING THIS ARGUMENT , THE PARLIAMENT EXPLAINS THAT , IN THE CONTEXT OF THE BUDGETARY PROCEDURE , THE ROLES OF THE COUNCIL AND THE PARLIAMENT ARE COMPLEMENTARY AND THAT THE JOINT ACTION OF THESE TWO INSTITUTIONS LEADS TO THE ESTABLISHMENT OF THE BUDGET WHICH CONSTITUTES A COMBINED ACT THAT HAS NO EQUIVALENT IN ANY OTHER ACT OF THE COMMUNITY INSTITUTIONS . IT IS THEREFORE OUT OF THE QUESTION THAT THE ANNULMENT OF SUCH AN ACT , SHOULD IT OCCUR , MAY CONCERN ONLY THE DELIBERATIONS OF ONE OF THE TWO INSTITUTIONS CONCERNED . IN THAT RESPECT THE PARLIAMENT POINTS OUT THAT ACCORDING TO ARTICLE 176 OF THE EEC TREATY ' ( THE ) INSTITUTION WHOSE ACT HAS BEEN DECLARED VOID ' IS REQUIRED TO TAKE THE NECESSARY MEASURES TO COMPLY WITH THE JUDGMENT OF THE COURT . SINCE THE BUDGET OF THE COMMUNITY IS THE PRODUCT OF TWO INSTITUTIONS , THAT PROVISION DOES NOT APPLY TO IT . IT MUST THEREFORE BE CONCLUDED THAT IT IS NOT POSSIBLE TO REVIEW THE BUDGET BY MEANS OF THE ACTION FOR ANNULMENT .
11 IN REPLY TO THAT ARGUMENT THE COUNCIL OBSERVES THAT UNTIL THE FINANCIAL YEAR 1975 THE BUDGET WAS IN ANY EVENT SUBJECT TO THE REVIEW PROVIDED FOR BY ARTICLE 173 OF THE EEC TREATY , SINCE THE ADOPTION OF THE BUDGET CONSTITUTED AN ACT OF THE COUNCIL WHICH PRODUCED LEGAL EFFECTS . IT IS INCONCEIVABLE THAT THE AUTHORS OF THE REVISIONS OF THE TREATIES RELATING TO BUDGETARY MATTERS INTENDED , WHEN ENLARGING THE PARLIAMENT ' S ROLE IN THAT SPHERE , TO REMOVE THE BUDGET FROM THE CATEGORY OF ACTS SUBJECT TO REVIEW BY THE COURT . THAT REVIEW IS , MOREOVER , THE NECESSARY COROLLARY TO THE INSTITUTIONS ' DUTY TO ACT WITHIN THE LIMITS OF THE POWERS CONFERRED ON THEM .
12 IT MUST BE OBSERVED THAT UNDER ARTICLE 203 ( 10 ) OF THE EEC TREATY EACH INSTITUTION IS TO EXERCISE THE POWERS CONFERRED UPON IT IN RESPECT OF THE BUDGET WITH DUE REGARD FOR THE PROVISIONS OF THE TREATY . IF IT WERE NOT POSSIBLE TO REFER THE ACTS OF THE BUDGETARY AUTHORITY FOR REVIEW BY THE COURT , THE INSTITUTIONS OF WHICH THAT AUTHORITY IS COMPOSED COULD ENCROACH UPON THE POWERS OF THE MEMBER STATES OR OF THE OTHER INSTITUTIONS OR EXCEED THE LIMITS WHICH HAVE BEEN SET TO THEIR OWN POWERS . THE TREATY DOES NOT , MOREOVER , CONTAIN ANY PROVISION WHICH EXCLUDES THE BRINGING OF THE ACTION FOR ANNULMENT AGAINST ACTS OF A BUDGETARY NATURE .
13 THE BUDGETARY NATURE OF THE CONTESTED ACTS DOES NOT THEREFORE HAVE THE EFFECT OF RENDERING THE APPLICATION INADMISSIBLE . THE PARLIAMENT ' S OBSERVATIONS ON THE MEASURES TO BE TAKEN IN THE EVENT OF ANNULMENT WILL BE CONSIDERED AFTER THE SUBSTANCE OF THE CASE HAS BEEN EXAMINED .
14 IT FOLLOWS FROM ALL THE FOREGOING CONSIDERATIONS THAT THE SUBMISSIONS PUT FORWARD AGAINST THE ADMISSIBILITY OF THE APPLICATION MUST BE REJECTED IN THEIR ENTIRETY . SUBSTANCE
15 IN LIMINE IT IS APPROPRIATE TO EXAMINE THOSE PROVISIONS OF ARTICLE 203 OF THE EEC TREATY WHICH ARE AT THE CENTRE OF THE DISPUTE BETWEEN THE PARTIES AND ALSO THE APPLICATION WHICH WAS MADE OF THE SAID PROVISIONS DURING THE PROCEDURE FOLLOWED FOR THE ESTABLISHMENT OF THE BUDGET FOR THE FINANCIAL YEAR 1986 . PARAGRAPH ( 9 ) OF THAT ARTICLE GOVERNS THAT PROCEDURE IN SO FAR AS IT CONCERNS THE FIXING OF WHAT IS KNOWN AS NON-COMPULSORY EXPENDITURE , THAT IS TO SAY EXPENDITURE OTHER THAN THAT NECESSARILY RESULTING FROM THE TREATY OR FROM ACTS ADOPTED IN ACCORDANCE THEREWITH .
16 IT IS CLEAR FROM THE SECOND SUBPARAGRAPH OF PARAGRAPH ( 4 ) AND FROM PARAGRAPHS ( 5 ) ( A ) AND ( 6 ) OF ARTICLE 203 THAT THE PARLIAMENT IS ENTITLED TO AMEND THE BUDGET AS REGARDS NON-COMPULSORY EXPENDITURE , THAT THE COUNCIL MAY MODIFY EACH OF THE AMENDMENTS SO ADOPTED BUT THAT THE PARLIAMENT MAY , IN THE COURSE OF ITS SECOND READING OF THE DRAFT BUDGET AS MODIFIED BY THE COUNCIL , AMEND OR REJECT THE MODIFICATIONS MADE BY THE COUNCIL TO THOSE AMENDMENTS . ON THE OTHER HAND , IN THE CASE OF COMPULSORY EXPENDITURE THE PARLIAMENT IS NO LONGER ABLE , AT THE SECOND READING , TO CALL IN QUESTION THE COUNCIL ' S DECISION ON THE PROPOSALS FOR MODIFICATION MADE BY THE PARLIAMENT IN THE COURSE OF THE FIRST READING .
17 ARTICLE 203 ( 9 ) PROVIDES , HOWEVER , FOR A LIMIT TO THE INCREASE WHICH MAY BE MADE IN NON-COMPULSORY EXPENDITURE IN RELATION TO THE EXPENDITURE OF THE SAME TYPE APPEARING IN THE BUDGET FOR THE PREVIOUS FINANCIAL YEAR . THAT LIMIT IS EXPRESSED BY A ' MAXIMUM RATE OF INCREASE ' WHICH THE COMMUNITY INSTITUTIONS ARE , BY VIRTUE OF THE THIRD SUBPARAGRAPH OF PARAGRAPH ( 9 ), REQUIRED TO RESPECT DURING THE BUDGETARY PROCEDURE .
18 ACCORDING TO THE SECOND SUBPARAGRAPH OF PARAGRAPH ( 9 ), THE MAXIMUM RATE IS TO BE FIXED ANNUALLY BY THE COMMISSION ON THE BASIS OF THREE OBJECTIVE FACTORS , NAMELY THE TREND OF THE GROSS NATIONAL PRODUCT , THE AVERAGE VARIATION IN THE NATIONAL BUDGETS AND THE TREND OF THE COST OF LIVING . WHERE , DURING THE BUDGETARY PROCEDURE , THE PARLIAMENT , THE COUNCIL OR THE COMMISSION CONSIDER THAT THE ACTIVITIES OF THE COMMUNITIES REQUIRE THAT THE SAID RATE SHOULD BE EXCEEDED , ANOTHER RATE MAY BE FIXED , PURSUANT TO THE FIFTH SUBPARAGRAPH OF PARAGRAPH ( 9 ), BY AGREEMENT BETWEEN THE COUNCIL AND THE PARLIAMENT .
19 FOR THE FINANCIAL YEAR 1986 THE COMMISSION DECLARED , AFTER CONSULTING THE ECONOMIC POLICY COMMITTEE , THAT THE MAXIMUM RATE OF INCREASE AMOUNTED TO 7.1% . WHEN IT SUBMITTED THE PRELIMINARY DRAFT BUDGET , THE COMMISSION INDICATED THAT IT HAD SET ITSELF THE TARGET OF KEEPING THE INCREASE IN THE PAYMENT APPROPRIATIONS NEEDED FOR NON-COMPULSORY EXPENDITURE WITHIN THE LIMIT OF THE MAXIMUM RATE OF 7.1% . IT ADDED , HOWEVER , THAT CERTAIN EXCEPTIONS WOULD HAVE TO BE MADE TO THAT PRINCIPLE .
20 IN THAT RESPECT THE COMMISSION , IN THE ' GENERAL POLITICAL INTRODUCTION ' TO THE PRELIMINARY DRAFT BUDGET , POINTED OUT IN PARTICULAR THAT SINCE 1978 THE VOLUME OF COMMITMENT APPROPRIATIONS HAD GROWN SIGNIFICANTLY FASTER THAN THAT OF PAYMENT APPROPRIATIONS . THAT MEANT THAT SINCE THE OPERATIONS TO WHICH THEY RELATED WERE SPREAD OVER A PERIOD OF TIME THE FINANCIAL REQUIREMENTS IN ORDER TO HONOUR THOSE COMMITMENTS WERE RISING CONSTANTLY . SOME 10 300 MILLION ECU HAD ACCUMULATED SINCE 1978 OF WHICH 8 200 MILLION ECU WERE FOR THE THREE STRUCTURAL FUNDS , NAMELY THE SOCIAL FUND , THE REGIONAL FUND AND THE GUIDANCE SECTION OF THE EAGGF . IN ORDER TO ABSORB THIS ' COST OF THE PAST ' AND TO ENSURE THAT IT WAS COVERED FINANCIALLY , THE COMMISSION CONSIDERED THAT THE INCREASE IN PAYMENT APPROPRIATIONS MUST EXCEED THE RATE OF 7.1% TO THE EXTENT NECESSARY TO COVER THE COMMITMENTS IN QUESTION IN 1986 .
21 IN ADOPTING THE DRAFT BUDGET AT ITS FIRST READING , THE COUNCIL FIXED THE INCREASE IN COMMITMENT APPROPRIATIONS AND THE INCREASE IN PAYMENT APPROPRIATIONS IN AMOUNTS WHICH WERE WITHIN THE LIMIT OF THE MAXIMUM RATE OF 7.1% . ACCORDING TO THE COUNCIL ' S CALCULATIONS , THE DRAFT BUDGET SHOWED AN INCREASE OF 578.1 MILLION ECU IN COMMITMENT APPROPRIATIONS , NAMELY 7.05% , AND 430 MILLION ECU IN PAYMENT APPROPRIATIONS , NAMELY 7.04% .
22 IN THE COMMENTS ACCOMPANYING ITS DRAFT BUDGET THE COUNCIL STATED THAT IT WAS ' 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 THE TWO NEW MEMBER STATES ARE MADE AVAILABLE TO THE COUNTRIES CONCERNED ' . IT ALSO SAID THAT IT WAS CONVINCED ' THAT THIS IS A COMPLEX ISSUE NEEDING TO BE RESOLVED BY BOTH PARTS OF THE BUDGETARY AUTHORITY TOGETHER , AND THAT ANY SOLUTION WILL PERFORCE BE SPREAD OVER A NUMBER OF FINANCIAL YEARS ' .
23 THE FOURTH SUBPARAGRAPH OF PARAGRAPH ( 9 ) PROVIDES THAT IF THE RATE OF INCREASE IN THE DRAFT BUDGET ESTABLISHED BY THE COUNCIL IS OVER HALF THE MAXIMUM RATE THE PARLIAMENT MAY , EXERCISING ITS RIGHT OF AMENDMENT , FURTHER RAISE THE LEVEL OF NON-COMPULSORY EXPENDITURE WITHIN THE LIMIT OF THE MAXIMUM RATE . IN THE EVENT , THE COUNCIL CALCULATED THIS MARGIN FOR MANOEUVRE ENJOYED BY THE PARLIAMENT AT 291.1 MILLION ECU FOR COMMITMENTS AND 216.65 MILLION ECU FOR PAYMENTS .
24 IT MUST BE POINTED OUT THAT THE COUNCIL ' S FIGURES ARE NOT CALCULATED WITH REFERENCE TO THOSE RESULTING FROM THE 1985 BUDGET AS ADOPTED AND PUBLISHED BUT WITH REFERENCE TO A CORRECTED BASE , SINCE THE PARLIAMENT ADOPTED , AT THE TIME OF THE BUDGETARY PROCEDURE WHICH LED TO THE 1985 BUDGET , CERTAIN AMENDMENTS IN REGARD TO WHICH THE COUNCIL HAD FORMULATED RESERVATIONS AND OBJECTIONS . HOWEVER , SINCE NO ACTION ON THE SUBJECT OF THE 1985 BUDGET HAS BEEN BROUGHT IN DUE TIME , THE COUNCIL MAY NOT , IN THE PRESENT PROCEEDINGS RELATING TO THE 1986 BUDGET , INTRODUCE A CORRECTION OF THE BASE FOR THE INCREASE IN NON-COMPULSORY EXPENDITURE BY CONTENDING THAT CERTAIN AMENDMENTS ADOPTED DURING THE PREVIOUS BUDGETARY PROCEDURE WERE IRREGULAR . THE INCREASES IN EXPENDITURE RESULTING FROM THOSE AMENDMENTS ARE PART OF THE EXPENDITURE ' TO BE INCURRED DURING THE CURRENT YEAR ' WHICH CONSTITUTES , ACCORDING TO THE FIRST SUBPARAGRAPH OF PARAGRAPH ( 9 ), THE BASIS OF CALCULATION FOR THE PURPOSES OF THE APPLICATION OF THE MAXIMUM RATE OF INCREASE . IF THE CORRECTION MADE TO THE BASE BY THE COUNCIL IS DISREGARDED , THE PARLIAMENT ' S MARGIN FOR MANOEUVRE WAS 294 MILLION ECU FOR COMMITMENT APPROPRIATIONS AND 217 MILLION ECU FOR PAYMENT APPROPRIATIONS .
25 IT IS COMMON GROUND THAT THE AMENDMENTS ADOPTED BY THE PARLIAMENT AT THE FIRST READING GAVE RISE TO A TOTAL INCREASE IN NON-COMPULSORY EXPENDITURE APPRECIABLY IN EXCESS OF THE MARGIN FOR MANOEUVRE WHICH HAS JUST BEEN MENTIONED . ACCORDING TO THE DIFFERENT METHODS OF CALCULATION EMPLOYED BY THE COUNCIL AND THE PARLIAMENT , THAT INCREASE WAS IN ANY EVENT , IN RELATION TO THE DRAFT BUDGET ADOPTED BY THE COUNCIL , IN EXCESS OF 1 700 MILLION ECU FOR COMMITMENT APPROPRIATIONS AS WELL AS FOR PAYMENT APPROPRIATIONS .
26 IT IS CLEAR FROM THE DEBATES OF THE PARLIAMENT THAT THE INCREASES WERE IN PARTICULAR INTENDED TO CONTRIBUTE TOWARDS THE ABSORPTION OF THE ' COST OF THE PAST ' , AS THE COMMISSION HAD PROPOSED IN ITS PRELIMINARY DRAFT BUDGET , AND ALSO TOWARDS THE REINFORCEMENT OF THE THREE STRUCTURAL FUNDS IN ORDER TO ENABLE THEM TO COPE WITH THE PROBLEMS CONNECTED WITH THE ACCESSION TO THE COMMUNITY OF SPAIN AND PORTUGAL ON 1 JANUARY 1986 . IN ITS RESOLUTION OF 14 NOVEMBER 1985 ON THE DRAFT GENERAL BUDGET THE PARLIAMENT , AFTER RECALLING THE POLITICAL AND LEGAL OBLIGATIONS ENTERED INTO VIS-A-VIS THE NEW MEMBER STATES , DECLARED THAT IT WAS NECESSARY TO REINSTATE , ON THE BASIS OF THE FIGURES DEEMED NECESSARY BY THE COMMISSION , ' THE AMOUNTS ESSENTIAL TO MEET ENLARGEMENT AND THE GREATER PART OF THE PAYMENTS ARISING OUT OF COMMITMENTS THAT HAVE ALREADY BEEN VOTED IN PREVIOUS YEARS ' , SINCE THESE TWO CATEGORIES OF EXPENDITURE WERE INEXTRICABLY LINKED .
27 AT ITS SECOND READING OF THE BUDGET THE COUNCIL DECIDED TO INCREASE NON-COMPULSORY EXPENDITURE , IN RELATION TO THE FIGURES ADOPTED IN THE DRAFT BUDGET , BY 1 199 MILLION ECU FOR COMMITMENT APPROPRIATIONS AND 1 251 MILLION ECU FOR PAYMENT APPROPRIATIONS . THESE AMOUNTS REPRESENTED A RATE OF INCREASE , FOUNDED ON THE CORRECTED 1985 BASE AS CALCULATED BY THE COUNCIL , OF 14.63% FOR COMMITMENT APPROPRIATIONS AND 20.5% FOR PAYMENT APPROPRIATIONS . BY LETTER OF 29 NOVEMBER 1985 ADDRESSED TO THE PRESIDENT OF THE PARLIAMENT , THE COUNCIL EXPLAINED THE MANNER IN WHICH IT HAD DECIDED ON THE AMENDMENTS ADOPTED BY THE PARLIAMENT AT ITS FIRST READING AND INDICATED THAT THE COUNCIL HAD ' THEREFORE ' AGREED TO PROPOSE TO THE ASSEMBLY THAT FOR 1986 , IN THE CASE OF NON-COMPULSORY EXPENDITURE , NEW RATES SHOULD BE FIXED IN RESPECT OF COMMITMENT APPROPRIATIONS ( 14.63% ) AND IN RESPECT OF PAYMENT APPROPRIATIONS ( 20.5% ).
28 IN COMMENCING THE DEBATES RELATING TO THE SECOND READING OF THE BUDGET , THE PARLIAMENT LET IT BE KNOWN THAT IT CONSIDERED THE MODIFICATIONS ACCEPTED BY THE COUNCIL TO BE TOO MODEST AND THAT IT WAS NOT PREPARED TO AGREE EITHER TO THE AMOUNTS ADOPTED BY THE COUNCIL AT ITS SECOND READING OR TO THE MODIFIED FIGURES OF THE MAXIMUM RATE OF INCREASE . THE DEBATES WERE CHARACTERIZED BY A CONCERN TO ESTABLISH A BUDGET OF SUCH A NATURE THAT THE EXPENDITURE CONNECTED WITH THE ENLARGEMENT AND THE ' COST OF THE PAST ' WOULD BE ADEQUATELY TAKEN INTO ACCOUNT .
29 DURING ITS 1052ND SESSION HELD AT STRASBOURG ON 11 AND 12 DECEMBER 1985 THE COUNCIL WENT ON TO FORMULATE A COMPROMISE PROPOSAL WHICH IT DESCRIBED AS A LAST OFFER . ON THAT OCCASION THE COUNCIL DECLARED ITSELF READY TO ACCEPT A NEW INCREASE IN THE AMOUNTS ADOPTED AT THE SECOND READING , NAMELY 195.7 MILLION ECU BY WAY OF COMMITMENT APPROPRIATIONS AND 241.8 MILLION ECU BY WAY OF PAYMENT APPROPRIATIONS . IT ALSO PROPOSED TO RAISE THE MAXIMUM RATE OF INCREASE TO 17.02% FOR COMMITMENT APPROPRIATIONS AND 24.46% FOR PAYMENT APPROPRIATIONS . THE COUNCIL AUTHORIZED ITS PRESIDENT TO SUBMIT THESE PROPOSALS TO THE PARLIAMENT BUT STATED THAT THEY WOULD BE WITHDRAWN IF THE PARLIAMENT DID NOT AGREE TO THEM .
30 AS THE PARLIAMENT DID NOT ACCEPT THESE COMPROMISE PROPOSALS , THE PRESIDENT OF THE COUNCIL FORMALLY WITHDREW THEM . THE PARLIAMENT , ON THE OTHER HAND , ADOPTED AMENDMENTS WHICH BROUGHT THE INCREASE IN APPROPRIATIONS , IN RELATION TO THOSE ADOPTED IN THE COUNCIL ' S MODIFIED DRAFT , TO 401.7 MILLION ECU FOR COMMITMENT APPROPRIATIONS AND TO 563.3 MILLION ECU FOR PAYMENT APPROPRIATIONS . THE TOTAL OF THE APPROPRIATIONS FOR NON-COMPULSORY EXPENDITURE WAS THUS RAISED TO 9 801.9 MILLION FOR COMMITMENT APPROPRIATIONS AND 7 917.7 MILLION FOR PAYMENT APPROPRIATIONS . ON 18 DECEMBER 1985 THE PRESIDENT OF THE PARLIAMENT DECLARED THAT THE BUDGETARY PROCEDURE HAD BEEN COMPLETED AND THAT AS A RESULT THE GENERAL BUDGET FOR THE FINANCIAL YEAR 1986 , AS APPROVED BY THE PARLIAMENT AT ITS SECOND READING , WAS FINALLY ADOPTED .
31 THE FIGURES SET OUT ABOVE SHOW THAT THE INCREASE IN NON-COMPULSORY EXPENDITURE RESULTING FROM THE PARLIAMENT ' S SECOND READING OF THE BUDGET WAS 18.17% ( COMMITMENTS ) AND 29.10% ( PAYMENTS ) AS COMPARED WITH THE 1985 BUDGET AS ADOPTED . THE FIGURES WERE 19.53% AND 29.73% RESPECTIVELY AS COMPARED WITH THE CORRECTED BASE FOR 1985 AS CALCULATED BY THE COUNCIL .
32 IT IS POSSIBLE ON THE BASIS OF THIS BRIEF ACCOUNT TO MAKE THREE FINDINGS OF FACT IN REGARD TO THE APPLICATION WHICH WAS MADE OF THE PROVISIONS ON THE MAXIMUM RATE OF INCREASE : ( A ) THE COMMISSION , THE COUNCIL AND THE PARLIAMENT ALL CONCURRED IN THE VIEW THAT THE MAXIMUM RATE OF INCREASE AS FIXED BY THE COMMISSION WAS NOT ADEQUATE TO ENABLE THE COMMUNITY TO FUNCTION PROPERLY DURING THE FINANCIAL YEAR 1986 ; ( B ) THE COUNCIL AND THE PARLIAMENT WERE UNABLE TO AGREE ON A NEW MAXIMUM RATE OF INCREASE ALTHOUGH THE POSITIONS WHICH THOSE TWO INSTITUTIONS FINALLY ADOPTED WERE QUITE CLOSE TO EACH OTHER ; ( C ) THE APPROPRIATIONS ADOPTED BY THE PARLIAMENT AT THE SECOND READING AND RATIFIED BY THE BUDGET AS ADOPTED ON 18 DECEMBER 1985 BY THE PRESIDENT OF THE PARLIAMENT EXCEED THE MAXIMUM RATE OF INCREASE AS FIXED BY THE COMMISSION AND THE VARIOUS MODIFIED RATES WHICH HAD BEEN PROPOSED BY THE COUNCIL .
33 THE FINDING UNDER ( B ) ABOVE IS DISPUTED BY THE COUNCIL , WHICH HAS ARGUED THAT , IN EXCEEDING THE INCREASES PROPOSED AT THE SECOND READING BY THE COUNCIL , THE PARLIAMENT ACCEPTED BY IMPLICATION THE FIGURES ON THE MAXIMUM RATE ESTABLISHED BY THE COUNCIL . THE PARLIAMENT HAS , HOWEVER , OBSERVED THAT SUCH A VIEW WOULD AMOUNT TO ACCEPTING A NEW RATE WHICH WOULD BE UNILATERALLY FIXED BY THE COUNCIL WHEREAS THE TREATY REQUIRES AN AGREEMENT BETWEEN THE COUNCIL AND THE PARLIAMENT . IT HAS ALSO POINTED OUT THAT NOT ONLY DOES IT HAVE THE CHOICE OF ACCEPTING OR REFUSING THE NEW RATE PROPOSED BY THE COUNCIL BUT IT MAY ALSO AT ANY TIME , BY VIRTUE OF ARTICLE 203 ( 8 ) OF THE TREATY , REJECT THE DRAFT BUDGET IN ITS ENTIRETY .
34 IT SHOULD BE STATED IN THIS RESPECT THAT , ALTHOUGH THE TREATY PROVIDES THAT THE MAXIMUM RATE MUST BE FIXED BY THE COMMISSION ON THE BASIS OF OBJECTIVE FACTORS , NO CRITERION HAS BEEN LAID DOWN FOR THE MODIFICATION OF THAT RATE . ACCORDING TO THE FIFTH SUBPARAGRAPH OF ARTICLE 203 ( 9 ), IT IS SUFFICIENT THAT THE COUNCIL AND THE PARLIAMENT COME TO AN AGREEMENT . IN VIEW OF THE IMPORTANCE OF SUCH AN AGREEMENT , WHICH CONFERS ON THE TWO INSTITUTIONS , ACTING IN CONCERT , THE FREEDOM TO INCREASE THE APPROPRIATIONS IN RESPECT OF NON-COMPULSORY EXPENDITURE IN EXCESS OF THE RATE DECLARED BY THE COMMISSION , THAT AGREEMENT MAY NOT BE INFERRED ON THE BASIS OF THE PRESUMED INTENTION OF ONE OR OTHER OF THOSE INSTITUTIONS .
35 THE FINDING UNDER ( C ) ABOVE IS DISPUTED BY THE PARLIAMENT . THAT INSTITUTION MAINTAINS THAT THE NON-COMPULSORY EXPENDITURE FOR THE FINANCIAL YEAR 1986 RELATING TO THE ENLARGEMENT AND TO THE ABSORPTION OF THE ' COST OF THE PAST ' HAD NO EQUIVALENT IN THE FINANCIAL YEAR 1985 . THAT EXPENDITURE COULD NOT THEREFORE BE COVERED BY THE PROCEDURE LAID DOWN BY ARTICLE 203 ( 9 ) AND CONSISTING OF THE APPLICATION OF A MAXIMUM RATE OF INCREASE TO THE NON-COMPULSORY EXPENDITURE FOR THE CURRENT FINANCIAL YEAR .
36 THAT ARGUMENT CANNOT BE ACCEPTED . THE FIRST SUBPARAGRAPH OF PARAGRAPH ( 9 ) PROVIDES THAT A MAXIMUM RATE ' IN RELATION TO THE EXPENDITURE OF THE SAME TYPE TO BE INCURRED DURING THE CURRENT YEAR ' IS TO BE FIXED ANNUALLY ' FOR THE TOTAL EXPENDITURE OTHER THAN THAT NECESSARILY RESULTING FROM THIS TREATY OR FROM ACTS ADOPTED IN ACCORDANCE THEREWITH ' . THE EXPRESSION ' EXPENDITURE OF THE SAME TYPE ' CAN ONLY REFER TO THE EXPENDITURE MENTIONED LATER IN THE SENTENCE , NAMELY NON-COMPULSORY EXPENDITURE . IT FOLLOWS THAT THE TREATY DOES NOT RECOGNIZE THE EXISTENCE OF NON-COMPULSORY EXPENDITURE WHOSE INCREASE FALLS OUTSIDE THE SCOPE OF THE MAXIMUM RATE OF INCREASE .
37 IN ITS DEFENCE THE PARLIAMENT FURTHER CHARGES THE COUNCIL WITH HAVING ACTED ILLEGALLY IN SUBMITTING AN INCOMPLETE DRAFT BUDGET , PARTICULARLY INASMUCH AS IT DID NOT INCLUDE THE APPROPRIATIONS NECESSARY IN ORDER TO COVER THE ENLARGEMENT AND THE ABSORPTION OF THE ' COST OF THE PAST ' . THE COUNCIL THUS INFRINGED THE GENERAL PRINCIPLE OF COMPLETE AND AUTHENTIC BUDGETIZATION . THE PARLIAMENT MAINTAINS THAT THIS CONDUCT COMPELLED IT TO COMPLETE THE BUDGET AND THUS LIMITED ITS POWERS .
38 WHATEVER MAY BE THE IMPACT OF THAT ARGUMENT ON THE EXCEEDING OF THE MAXIMUM RATE OF INCREASE BY THE AMENDMENTS ADOPTED BY THE PARLIAMENT , IT IS SUFFICIENT TO STATE ON THIS POINT THAT THE DETERMINATION OF THE EXIGENCIES POSED , FOR THE BUDGET OF THE COMMUNITIES , BY SPECIAL SITUATIONS SUCH AS THE ACCESSION OF NEW MEMBER STATES OR THE ABSORPTION OF THE ' COST OF THE PAST ' IS NOT A MATTER FOR THE COURT BUT FOR THE COUNCIL AND THE PARLIAMENT , ACTING IN CONCERT .
39 IT MUST THEREFORE BE HELD THAT THE ACT OF THE PRESIDENT OF THE PARLIAMENT OF 18 DECEMBER 1985 WHEREBY HE DECLARED THE BUDGET FOR 1986 FINALLY ADOPTED OCCURRED AT A TIME WHEN THE BUDGETARY PROCEDURE WAS NOT YET COMPLETED FOR WANT OF AN AGREEMENT BETWEEN THE TWO INSTITUTIONS CONCERNED ON THE FIGURES TO BE ADOPTED FOR THE NEW MAXIMUM RATE OF INCREASE . THAT ACT IS THEREFORE VITIATED BY ILLEGALITY . THE CONSEQUENCES TO BE DRAWN FROM THE SAID ILLEGALITY
40 THE COUNCIL SEEKS THE ANNULMENT OF THE 1986 BUDGET IN SO FAR AS THE COMMITMENT APPROPRIATIONS AND THE PAYMENT APPROPRIATIONS IN RESPECT OF NON-COMPULSORY EXPENDITURE EXCEED THE NEW RATES OF INCREASE PROPOSED BY THE COUNCIL BY LETTER OF 29 NOVEMBER 1985 ADDRESSED TO THE PRESIDENT OF THE PARLIAMENT . IT ALSO REQUESTS THE COURT TO DECIDE THAT THE DECLARATION BY THE PRESIDENT OF THE PARLIAMENT ON 18 DECEMBER 1985 THAT THE 1986 BUDGET HAD BEEN FINALLY ADOPTED WAS MADE IN BREACH OF THE TREATIES , AND IN PARTICULAR INFRINGED ARTICLE 203 ( 7 ) AND ( 9 ) OF THE EEC TREATY AND THE PARALLEL PROVISIONS OF THE EAEC AND ECSC TREATIES . ALTERNATIVELY , THE COUNCIL REQUESTS THE COURT TO ANNUL THE BUDGET FOR 1986 IN ITS ENTIRETY AND , AS A CONSEQUENCE , THE ACT OF THE PRESIDENT OF THE PARLIAMENT OF 18 DECEMBER 1985 , AND IN THAT CASE TO STATE WHICH OF THE EFFECTS OF THE BUDGET ARE TO BE CONSIDERED AS DEFINITIVE .
41 THE PARLIAMENT REQUESTS THE COURT TO HOLD , IF IT CONSIDERS THAT THE APPLICATION IS WELL-FOUNDED , THAT THE ANNULMENT SHOULD RELATE TO THE BUDGET IN ITS ENTIRETY SO AS TO COVER THE WHOLE OF THE BUDGETARY PROCEDURE WHICH , ACCORDING TO THE PARLIAMENT , IS VITIATED AB INITIO BY THE UNLAWFUL CONDUCT OF THE COUNCIL . THE PARLIAMENT STRESSES THAT A PARTIAL ANNULMENT WOULD BE CONTRARY TO THE NATURE OF THE BUDGET AS A SINGLE ACT AND THAT , IN ADDITION , IT WOULD ALLOW THE DRAFT MODIFIED BY THE COUNCIL AT ITS SECOND READING TO REMAIN IN EXISTENCE , A RESULT WHICH WOULD BE CONTRARY TO ARTICLE 203 ( 9 ).
42 IT MUST BE OBSERVED IN THE FIRST PLACE THAT , ALTHOUGH IT IS INCUMBENT ON THE COURT TO ENSURE THAT THE INSTITUTIONS WHICH MAKE UP THE BUDGETARY AUTHORITY KEEP WITHIN THE LIMITS OF THEIR POWERS , IT MAY NOT INTERVENE IN THE PROCESS OF NEGOTIATION BETWEEN THE COUNCIL AND THE PARLIAMENT WHICH MUST RESULT , WITH DUE REGARD FOR THOSE LIMITS , IN THE ESTABLISHMENT OF THE GENERAL BUDGET OF THE COMMUNITIES . IT IS THEREFORE NECESSARY TO REJECT THE PRINCIPAL CLAIM OF THE COUNCIL FOR A PARTIAL ANNULMENT OF THE BUDGET , THE EFFECT OF WHICH WOULD BE TO BRING INTO FORCE THE VERSION OF THAT DOCUMENT RESULTING FROM THE PROPOSALS MADE BY THE COUNCIL TO THE PARLIAMENT ON 29 NOVEMBER 1985 .
43 IT MUST NEXT BE REMARKED THAT THE IRREGULARITY ATTACHING TO THE ACT OF THE PRESIDENT OF THE PARLIAMENT OF 18 DECEMBER 1985 IS TO BE TRACED TO THE FACT THAT HE DECLARED , IN THE LANGUAGE OF ARTICLE 203 ( 7 ), THAT THE BUDGET WAS ' FINALLY ' ADOPTED WHEREAS A FINAL ADOPTION HAD NOT YET BEEN ACHIEVED , SINCE THE TWO INSTITUTIONS HAD NOT YET COME TO AN AGREEMENT ON THE FIGURES CONCERNING A NEW MAXIMUM RATE OF INCREASE .
44 LOOKING BACK ON THE SITUATION AS IT PRESENTED ITSELF AT THE TIME OF THE SECOND READING OF THE BUDGET BY THE PARLIAMENT , THE COURT IS LEFT WITH THE IMPRESSION THAT THE RESPECTIVE POSITIONS TAKEN BY THE TWO INSTITUTIONS COULD HARDLY HAVE CONSTITUTED A SERIOUS OBSTACLE TO THE POSSIBILITY OF ARRIVING AT AN AGREEMENT . THE INCREASES IN NON-COMPULSORY EXPENDITURE ESTABLISHED BY THE PARLIAMENT REPRESENTED RATES OF INCREASE OF 18.17% FOR COMMITMENT APPROPRIATIONS AND 29.10% FOR PAYMENT APPROPRIATIONS , WHEREAS THE RATES RESULTING FROM THE LAST PROPOSALS MADE BY THE COUNCIL - THE COMPROMISE PROPOSALS , ALTHOUGH LATER ' WITHDRAWN ' - WERE 17.02% AND 24.46% RESPECTIVELY .
45 THE COURT DOES NOT HAVE TO CONSIDER TO WHAT EXTENT THE COUNCIL ' S OR THE PARLIAMENT ' S ATTITUDE DURING THE ENTIRE NEGOTIATIONS ON THE BUDGET PREVENTED THEM FROM ARRIVING AT AN AGREEMENT . IT MUST CONFINE ITSELF TO HOLDING THAT , SINCE THAT ESSENTIAL AGREEMENT WAS LACKING , THE PRESIDENT OF THE PARLIAMENT COULD NOT LAWFULLY DECLARE THAT THE BUDGET HAD BEEN FINALLY ADOPTED . THAT DECLARATION MUST THEREFORE BE ANNULLED .
46 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 THE TOTAL ANNULMENT OF THE BUDGET .
47 IT IS FOR THE COUNCIL AND THE PARLIAMENT TO TAKE THE MEASURES NECESSARY TO COMPLY WITH THIS JUDGMENT AND TO RESUME THE BUDGETARY PROCEDURE AT THE VERY POINT AT WHICH THE PARLIAMENT , AT ITS SECOND READING , INCREASED THE APPROPRIATIONS IN RESPECT OF NON-COMPULSORY EXPENDITURE BEYOND THE MAXIMUM RATE OF INCREASE FIXED BY THE COMMISSION AND WITHOUT HAVING COME TO AN AGREEMENT WITH THE COUNCIL ON THE FIGURE FOR A NEW RATE .
48 THE DECLARATION THAT THE 1986 BUDGET IS ILLEGAL COMES AT A TIME WHEN A SUBSTANTIAL PART OF THE FINANCIAL YEAR 1986 HAS ALREADY ELAPSED . IN THESE CIRCUMSTANCES , THE NEED TO GUARANTEE THE CONTINUITY OF THE EUROPEAN PUBLIC SERVICE AND ALSO IMPORTANT REASONS OF LEGAL CERTAINTY , WHICH MAY BE COMPARED WITH THOSE WHICH APPLY IN THE CASE OF THE ANNULMENT OF CERTAIN REGULATIONS , JUSTIFY THE COURT IN EXERCISING THE POWER EXPRESSLY CONFERRED ON IT BY THE SECOND PARAGRAPH OF ARTICLE 174 OF THE EEC TREATY IN THE CASE OF THE ANNULMENT OF A REGULATION AND IN STATING THE EFFECTS OF THE 1986 BUDGET WHICH MUST BE CONSIDERED AS DEFINITIVE . IN THE PARTICULAR CIRCUMSTANCES OF THIS CASE IT MUST BE HELD THAT THE ANNULMENT OF THE ACT OF THE PRESIDENT OF THE PARLIAMENT MAY NOT CALL IN QUESTION THE VALIDITY OF THE PAYMENTS MADE AND THE COMMITMENTS ENTERED INTO IN IMPLEMENTATION OF THE 1986 BUDGET UP TO THE DATE OF DELIVERY OF THIS JUDGMENT .
49 THE COUNCIL HAS ALSO PUT FORWARD IN THESE PROCEEDINGS A REQUEST WHICH DOES NOT CONCERN THE APPLICATION WHICH HAS BEEN MADE OF THE MAXIMUM RATE OF INCREASE BUT THE RAISING BY THE PARLIAMENT , AT ITS SECOND READING , OF THE AMOUNTS ENTERED IN CERTAIN BUDGETARY LINES RELATING TO EXPENDITURE WHICH , ACCORDING TO THE COUNCIL , CONSTITUTES COMPULSORY EXPENDITURE .
50 FOLLOWING THE ANNULMENT OF THE ACT OF THE PRESIDENT OF THE PARLIAMENT OF 18 DECEMBER 1985 , THIS REQUEST HAS BECOME REDUNDANT . IT SHOULD ALSO BE NOTED THAT THE PROBLEMS REGARDING THE DELIMITATION OF NON-COMPULSORY EXPENDITURE IN RELATION TO COMPULSORY EXPENDITURE ARE THE SUBJECT OF AN INTERINSTITUTIONAL CONCILIATION PROCEDURE SET UP BY THE JOINT DECLARATION OF THE EUROPEAN PARLIAMENT , THE COUNCIL AND THE COMMISSION OF 30 JUNE 1982 ( OFFICIAL JOURNAL C 194 ) AND THAT THEY ARE CAPABLE OF BEING RESOLVED IN THAT CONTEXT .
51 IN THE RESULT , IT IS THEREFORE NECESSARY : ( I ) TO DECLARE VOID THE ACT OF THE PRESIDENT OF THE PARLIAMENT OF 18 DECEMBER 1985 WHEREBY HE DECLARED THAT THE BUDGET FOR 1986 HAD BEEN FINALLY ADOPTED ( ' FINAL ADOPTION OF THE GENERAL BUDGET OF THE EUROPEAN COMMUNITIES FOR THE FINANCIAL YEAR 1986 ' ); ( II ) TO STATE THAT THE SAID ANNULMENT MAY NOT CALL IN QUESTION THE VALIDITY OF THE PAYMENTS MADE AND THE COMMITMENTS ENTERED INTO , IN IMPLEMENTATION OF THE BUDGET FOR 1986 AS PUBLISHED IN THE OFFICIAL JOURNAL , BEFORE THE DATE OF DELIVERY OF THIS JUDGMENT ; ( III ) TO DISMISS THE REMAINDER OF THE APPLICATION .