1 THE PURPOSE OF THE ACTION IS THE ANNULMENT OF THE DECISION OF THE COUNCIL CONTAINED IN THE MINUTES OF ITS MEETING ON 22 AND 23 JULY 1974 ON THE LEVEL OF SALARIES OF OFFICIALS AND OTHER SERVANTS OF THE COMMUNITIES INSOFAR AS THE COUNCIL DECIDED, IN RESPECT OF THE SALARY PERIODS FROM 1 JULY 1972 TO 30 JUNE 1973 AND FROM 1 JULY 1973 TO 30 JUNE 1974, NOT TO ADJUST THE SAID SALARIES PREVIOUSLY FIXED BY REGULATIONS NO 2188/73 OF THE COUNCIL OF 9 AUGUST 1973 ( OJ L 223 OF 11 . 8 . 1973 ) AND 2/74 OF THE COUNCIL OF 28 DECEMBER 1973 ( OJ L 2 OF 3 . 1 . 1974 ).
2 THE APPLICANT CLAIMS THAT BY REFUSING TO ADJUST THESE SALARIES NOTWITHSTANDING THE DEFECTIVENESS WHICH AFFECTED THE ANNUAL SPECIFIC INDICES EMPLOYED IN FIXING THEM, THE COUNCIL INFRINGED BOTH ARTICLE 65 OF THE STAFF REGULATIONS AND CONDITIONS OF EMPLOYMENT OF OTHER SERVANTS OF THE COMMUNITIES AND THE RULE OF LEGITIMATE CONFIDENCE THAT OFFICIALS AND OTHER SERVANTS COULD HAVE IN THE APPLICATION OF THE DECISION PREVIOUSLY TAKEN BY THE COUNCIL ON 20 AND 21 MARCH 1972 .
3 UNDER THE SECOND PARAGRAPH OF ARTICLE 65 ( 1 ) OF THE STAFF REGULATIONS THE COUNCIL HAS TO CONSIDER DURING THE ANNUAL REVIEW OF THE REMUNERATIONS OF THE OFFICIALS AND OTHER SERVANTS OF THE COMMUNITIES WHETHER, AS PART OF ECONOMIC AND SOCIAL POLICY OF THE COMMUNITIES, REMUNERATION SHOULD BE ADJUSTED, TAKING PARTICULAR ACCOUNT OF ANY INCREASES IN SALARIES IN THE PUBLIC SERVICE AND THE NEEDS OF RECRUITMENT .
4 IT IS ADMITTED THAT THESE ADJUSTMENTS MUST SEEK NOT ONLY TO ADJUST SALARIES IN RELATION TO THE INCREASE IN THE COST OF LIVING, BUT ALSO TO GIVE OFFICIALS AND SERVANTS THE BENEFITS OF THE INCREASE IN THE LEVEL OF INCOMES RECORDED IN THE COMMUNITY .
5 UNDER THE FIRST PARAGRAPH OF ARTICLE 65 ( 1 ) THIS REVIEW HAS TO TAKE PLACE ON THE BASIS OF A JOINT INDEX PREPARED BY THE STATISTICAL OFFICE OF THE EUROPEAN COMMUNITIES IN AGREEMENT WITH THE NATIONAL STATISTICAL OFFICES OF THE MEMBER STATES .
6 UNTIL 1972 A COMMUNITY SPECIFIC INDEX WAS USED FOR THIS PURPOSE, PREPARED ACCORDING TO A WEIGHTED AVERAGE, ON THE BASIS OF NATIONAL SPECIFIC INDICES WHICH WERE REQUIRED TO REFLECT, IN RESPECT OF A PARTICULAR SAMPLE OF OFFICIALS, THE ALTERATION OF THE AVERAGE NOMINAL SALARY IN RELATION TO THE INCREASE IN THE COST OF LIVING .
7 FOR THE PURPOSE OF ELIMINATING THE DIFFERENCES OF VIEW CAUSED BY THIS REVIEW, IN PARTICULAR AS REGARDS THE MEASURE OF THE INCREASE IN THE PURCHASING POWER OF NATIONAL SALARIES, THE COUNCIL ON 20 AND 21 MARCH 1972 ADOPTED A 'SYSTEM OF ADJUSTMENT OF SALARIES' IN WHICH IT UNDERTOOK, FOR A TRIAL PERIOD OF 3 YEARS FROM 1 JULY 1972 TO 30 JUNE 1975, TO FIX THE LEVEL OF INCREASE IN COMMUNITY REMUNERATION WITHIN A BRACKET FORMED ON THE ONE HAND BY THE SPECIFIC INDEX ALREADY PREVIOUSLY USED, BUT IMPROVED, AND ON THE OTHER HAND BY AN INDEX CALLED 'TOTAL EMOLUMENTS PER HEAD IN PUBLIC ADMINISTRATION', AS PUBLISHED IN NATIONAL ACCOUNTS, WHICH INDEX HAD TO REFLECT THE VARIATION IN THE TOTAL SALARY AND OTHER BENEFITS AFFORDED TO THE NATIONAL OFFICIALS IN EACH MEMBER STATE .
8 FOR THE 1972-1973 SALARY PERIOD THE COUNCIL, ON THE BASIS OF A SPECIFIC INDEX OF 3.6 PER CENT AND A TOTAL EMOLUMENTS INDEX OF 3.9 PER CENT ISSUED BY THE STATISTICAL OFFICE OF THE EUROPEAN COMMUNITIES, FIXED THE INCREASE IN SALARIES AT 3.65 PER CENT .
9 FOR THE 1973-1974 SALARY PERIOD, ON THE BASIS OF A SPECIFIC INDEX 7.3 PER CENT AND A TOTAL EMOLUMENTS INDEX OF 3.2 PER CENT, THE COUNCIL FIXED THE INCREASE AT 3.3 PER CENT .
10 IN SEEKING THE REASONS FOR THE SUDDEN INCREASE FROM ONE YEAR TO THE NEXT OF THE COMMUNITY SPECIFIC INDEX, THE COMMISSION FOUND THAT THE ITALIAN SPECIFIC INDEX, FROM ONE PERIOD TO THE NEXT, HAD MADE A LEAP OF SOME 30 PER CENT WHICH WAS REFLECTED IN THE COMMUNITY SPECIFIC INDEX .
11 THIS SUDDEN INCREASE WAS DUE TO THE FACT THAT AS REGARDS THE FIRST PERIOD THE ITALIAN SPECIFIC INDEX TOOK ACCOUNT ONLY OF BASIC SALARIES AND CERTAIN GENERAL AND PERMANENT ALLOWANCES, TO THE EXCLUSION OF A WHOLE SERIES OF ADDITIONAL ADVANTAGES OF A SPECIFIC NATURE AND RELATING TO SPECIAL PUBLIC ACCOUNTS OR ADMINISTRATION INDEPENDENT OF THE BUDGET, BUT FROM WHICH LARGE CATEGORIES OF OFFICIALS BENEFITED, WHEREAS FOR THE FOLLOWING PERIOD, AS A RESULT OF A REFORM AND RESTRUCTURING OF THE SYSTEM OF SALARIES IN THE ITALIAN PUBLIC SERVICE RESULTING FROM A DECREE OF 30 JUNE 1972 AND A LAW OF 15 NOVEMBER 1973, THESE ADDITIONAL ADVANTAGES HAD TO A LARGE EXTENT BEEN INCLUDED IN THE SALARIES .
12 IT APPEARS THAT THE LEVEL OF SALARIES IN THE ITALIAN PUBLIC SERVICE BEFORE THE ABOVE REFORM WAS ATTRIBUTABLE, TO AN EXTENT DISPUTED BY THE PARTIES BUT NOT INCONSIDERABLE, TO THESE ADDITIONAL ITEMS .
13 THE COMMISSION INFERS THAT THE TOTAL OF CASUAL REMUNERATION WHICH, ACCORDING TO THE COMMISSION, REPRESENTS AN AVERAGE AMOUNT OF 30 PER CENT OF THE BASIC SALARIES, SHOULD HAVE BEEN TAKEN INTO ACCOUNT BEFORE THE 1972-1973 REFORM IN PREPARING THE ITALIAN SPECIFIC INDEX AND HENCE IN PREPARING THE COMMUNITY SPECIFIC INDEX .
14 SUCH CORRECTION WOULD MEAN A REDUCTION IN THE SPECIFIC INDEX ( 7.3 ) USED TO FIX THE LEVEL OF SALARIES FROM 1 JULY 1973 BUT AN INCREASE IN THE SPECIFIC INDEX ( 3.6 ) USED FOR THE LEVEL OF REMUNERATION AS FROM 1 JULY 1972 .
15 ACCORDING TO THE APPLICANT THIS CORRECTION DOES NOT AFFECT THE LEVEL OF REMUNERATION FOR THE 1973/1974 SALARY PERIOD BUT MUST LEAD TO AN ADJUSTMENT FOR THE 1972/1973 PERIOD .
16 ON BEING INFORMED OF THESE ITEMS TO BE APPRAISED, THE COUNCIL UNDERTOOK ON 18 DECEMBER 1973, AT THE TIME WHEN IT WAS FIXING THE SALARY FOR THE 1973/1974 PERIOD, TO 'CONSIDER WITH AN OPEN MIND' THE PROPOSALS WHICH THE COMMISSION INTENDED TO PUT TO IT IN THIS RESPECT .
17 HOWEVER, BY THE DECISION CHALLENGED THE COUNCIL DECIDED NOT TO UNDERTAKE THE CORRECTION PROPOSED BY THE COMMISSION .
18 THE ACTION RAISES THE QUESTION WHETHER THE FACTS CITED BY THE COMMISSION VITIATED THE SPECIFIC INDEX BY REASON OF ERROR SO THAT ITS MAINTENANCE WOULD CONSTITUTE AN INFRINGEMENT OF ARTICLE 65 OF THE STAFF REGULATIONS AND WOULD VIOLATE THE RULE OF LEGITIMATE CONFIDENCE WHICH THE OFFICIALS CONCERNED MAY HAVE IN THE CORRECT APPLICATION BY THE COUNCIL OF ITS DECISION OF 20 AND 21 MARCH 1972 .
19 THESE TWO PLEAS ARE RELATED AND IT IS PROPER TO DEAL WITH THEM TOGETHER .
20 BY ITS DECISION OF 20 AND 21 MARCH 1972 THE COUNCIL INTENDED FOR THE IMPLEMENTATION OF ARTICLE 65 TO BIND ITSELF FOR A DEFINITE PERIOD TO OBSERVE FIXED CRITERIA, IN PARTICULAR BY UNDERTAKING TO FIX THE INCREASE IN SALARIES IN RELATION TO THE INCREASE IN THE PURCHASING POWER OF NATIONAL SALARIES WITHIN THE BRACKET FORMED BY THE TWO ABOVEMENTIONED INDICES .
21 THIS SYSTEM WAS RECOGNIZED BY THE COURT OF JUSTICE IN ITS JUDGMENT OF 5 JUNE 1973 IN CASE 81/72 COMMISSION V COUNCIL ( 1973 ) ECR 575 AS CONSTITUTING A LEGAL METHOD OF THE EXERCISE BY THE COUNCIL OF THE DISCRETION WHICH ARTICLE 65 GIVES IT AND AS COMMITTING THE INSTITUTION FOR THE PERIOD WHICH IT HAS LAID DOWN .
22 THE COMMISSION IS THEREFORE RIGHT IN MAINTAINING THAT THE COUNCIL CANNOT, TO ESCAPE THIS OBLIGATION, PLEAD THIS DISCRETION, THE EXERCISE OF WHICH IT HAS ITSELF DETERMINED .
23 THUS, AS HAS BEEN RECOGNIZED BY THE TWO PARTIES, IT MUST BE DETERMINED WHETHER, AND IF SO TO WHAT EXTENT, THE SPECIFIC INDEX USED OBSERVED THE RULE LAID DOWN BY THE DECISION OF THE COUNCIL OF 20 AND 21 MARCH 1972 .
24 THIS DECISION PROVIDES THAT THE INDEX SHALL BE CONSTITUTED BY THE 'INDEX OF THE VARIATION OF PUBLIC SALARIES IN MEMBER STATES DURING THE PAST YEAR PREPARED BY THE STATISTICAL OFFICE OF THE EUROPEAN COMMUNITIES IN ACCORDANCE WITH THE METHOD USED UNTIL NOW, BUT WITH CERTAIN IMPROVEMENTS '.
25 THIS METHOD HAD PREVIOUSLY BEEN FIXED BY THE COUNCIL'S WORKING PARTY ON STAFF REGULATIONS IN A REPORT APPROVED BY THE COMMITTEE OF PERMANENT REPRESENTATIVES AT ITS MEETING ON 25-27 JULY 1966 .
26 ACCORDING TO THIS REPORT THE CONCEPT OF SALARIES 'SHOULD TAKE ACCOUNT OF ALL EMOLUMENTS IN THE NATURE OF REMUNERATION WHICH ARE GENERALLY AND PERMANENTLY PAID ON THE BASIS OF FIXED RULES '.
27 THE IMPROVEMENTS ENVISAGED BY THE DECISION OF 20 AND 21 MARCH 1972 HAVE AS THEIR OBJECT AN IMPROVED HARMONIZATION OF THE CALCULATING METHODS APPLIED BY THE VARIOUS NATIONAL ADMINISTRATIONS AND TO ENSURE THAT THE COMMISSION IS MORE COMPLETELY INFORMED, BUT DO NOT BRING INTO QUESTION THE BASIS OF THE METHOD PREVIOUSLY LAID DOWN .
28 NO DOUBT THIS SAME REPORT PROVIDED FOR THE POSSIBILITY OF THE COMMISSION PUTTING FORWARD, WHERE APPROPRIATE, FACTORS FOR CONSIDERATION OTHER THAN THOSE RESULTING FROM THE METHOD ADOPTED, BUT IT LEFT THE COUNCIL FREE WITH REGARD TO TAKING THEM INTO ACCOUNT .
29 MOREOVER IT IS THE, IN THE COMMISSION'S OPINION, RESTRICTIVE INTERPRETATION WHICH THE COUNCIL GIVES TO THE CONCEPT OF 'SALARIES', AND NOT THE REFUSAL TO TAKE INTO ACCOUNT 'OTHER FACTORS', WHICH ARE NOT SPECIFIED, TO WHICH THE COMMISSION OBJECTS .
30 THE COMMISSION WRONGLY INTERPRETS THE PHRASE 'GENERALLY ... PAID' AS REFERRING TO THE 'AVERAGE AMOUNT OF THE TOTAL OF THESE EMOLUMENTS RECEIVED BY EACH NATIONAL OFFICIAL '.
31 IT WAS FOR THE PURPOSE OF REFLECTING THIS TOTAL, AND TO CORRECT WHERE NECESSARY THE UNREPRESENTATIVE CHARACTER OF THE SPECIFIC INDEX, THAT THE TOTAL EMOLUMENTS INDEX WAS ADOPTED ALONGSIDE THE SPECIFIC INDEX .
32 THE CRITERIA OF GENERALITY AND PERMANENCE OF THE SALARIES AND ALLOWANCES TO BE TAKEN INTO ACCOUNT IN THE SPECIFIC INDEX MEAN ON THE CONTRARY THAT ONLY EMOLUMENTS PAID REGULARLY AND ON A LEGAL BASIS OR UNDER FIXED RULES TO ALL PUBLIC OFFICIALS SHOULD BE INCLUDED IN THIS INDEX .
33 IT WAS THUS ON A STRICT INTERPRETATION OF THE DECISION OF THE COUNCIL OF 20 AND 21 MARCH 1972 THAT THE ITALIAN SPECIFIC INDEX WAS CALCULATED WITHOUT TAKING INTO ACCOUNT THE ADDITIONAL FACTORS IN THE PUBLIC REMUNERATION IN RESPECT OF THE PERIOD WHEN THESE FACTORS HAD NOT YET BEEN INCLUDED IN THE SALARIES .
34 IT APPEARS MOREOVER FROM THE DOCUMENTS SUPPLIED BY THE COMMISSION THAT THESE ALLOWANCES, GRANTS, VOUCHERS AND OTHER BENEFITS IN ADDITION TO THE SALARIES REPRESENTED, DEPENDING ON THE ADMINISTRATIONS WHICH MADE THEM, A PERCENTAGE VARYING FROM 11 TO 49 PER CENT AND AMOUNTING IN ONE CASE EVEN TO 92 PER CENT OF THE BASIC SALARY .
35 THEIR INCORPORATION, BY THE EXPEDIENT OF A MEAN, IN A SPECIFIC INDEX, THE OBJECT OF WHICH IS PRECISELY TO REFLECT THE VARIATION OF ONE OF MORE PARTICULAR SAMPLES AMONG THE CAREERS IN THE PUBLIC SERVICE, WAS THUS TO BE VIEWED WITH RESERVE AND IN ANY EVENT COULD NOT IN ANY SENSE BE REGARDED AS CONSTITUTING THE SOLE CORRECT INTERPRETATION OF THE CONCEPT OF SPECIFIC INDEX .
36 NO DOUBT IN SO FAR AS THE ADJUSTMENT OF SALARIES IN THE ITALIAN PUBLIC SERVICE IS DONE BY CASUAL ALLOWANCES RATHER THAN BY BASIC SALARIES, THE SPECIFIC INDEX DOES NOT COMPLETELY REFLECT - BUT TO AN UNASCERTAINABLE EXTENT SINCE IT VARIES FROM ONE ADMINISTRATION TO ANOTHER - THE INCREASE IN THE PURCHASING POWER WHICH ITALIAN OFFICIALS ENJOYED .
37 HOWEVER, THE FACT SHOULD NOT BE LOST SIGHT OF THAT THE JOINT INDEX REFERRED TO IN ARTICLE 65 OF THE STAFF REGULATIONS HAS NOT SINCE 1972 BEEN CONSTITUTED ONLY BY THE SPECIFIC INDEX .
38 ON THE CONTRARY, THE MAIN FACTOR IN THE DECISION OF 20 AND 21 MARCH 1972 CONSISTS OF CONCEIVING THIS JOINT INDEX AS FORMED BY A BRACKET OF TWO INDICES, THE SECOND OF WHICH, THE TOTAL EMOLUMENTS PER HEAD INDEX, HAS PRECISELY THE CHARACTERISTIC OF TAKING INTO ACCOUNT ALL THE FACTORS CONSTITUTING, EITHER AS BASIC OR ADDITIONAL, THE TOTAL REMUNERATION WHICH OFFICIALS IN THE PUBLIC SERVICE IN THE MEMBER STATES ENJOY .
39 THUS THE NECESSARILY RELATIVE NATURE, ON ACCOUNT OF THE COMPLEXITY AND DIVERSITY OF THE NATIONAL SYSTEMS, OF ONE OF THE INDICES IS TO A CERTAIN EXTENT CORRECTED BY THE OTHER, AND IT IS FROM THEIR JOINT IMPLEMENTATION THAT THE SUFFICIENTLY REPRESENTATIVE NATURE OF THE JOINT INDEX MUST RESULT .
40 IN THIS RESPECT THE COMMISSION STATES THAT THE COUNCIL HAS ON TWO OCCASIONS SINCE 21 MARCH 1972 ADHERED VERY CLOSELY TO THE LOWER INDEX .
41 IF IN A PERMANENT SYSTEM OF ADJUSTMENT OF SALARIES IN WHICH THE MEASURE OF THE VARIATION IN NATIONAL SALARIES IS CONSIDERED AS RESULTING FROM THE JOINT CONSIDERATION OF TWO INDICES, THE COUNCIL SYSTEMATICALLY AND WITHOUT VALID REASON ADOPTS THE LOWER INDEX, IT WOULD BE DISREGARDING AN ESSENTIAL FACTOR IN THE SYSTEM TO WHICH IT HAD INTENDED TO COMMIT ITSELF .
42 HOWEVER, IN THE PRESENT CASE THE COUNCIL HAS EXPRESSLY STRESSED IN ITS DECISION OF 20 AND 21 MARCH 1972 THAT IT WAS A QUESTION OF A SYSTEM OF APPRAISAL ADOPTED ON A TRIAL BASIS FOR A PERIOD OF 3 YEARS, THE VALIDITY OF WHICH WOULD DURING THE THIRD YEAR BE THE SUBJECT OF A THOROUGH REVIEW FOR THE PURPOSE OF MAKING THE STRUCTURAL ALTERATIONS WHICH PROVE NECESSARY .
43 IN THESE CIRCUMSTANCES ITS DECISION DURING THE TWO PERIODS IN QUESTION TO ADOPT THE LOWER INDEX CANNOT BE REGARDED AS BEING WRONG AND DOES NOT JUSTIFY A REVISION OF THE CALCULATION OF THE SPECIFIC INDICES .
44 IT FOLLOWS FROM THE FOREGOING CONSIDERATIONS THAT THE CALCULATION OF THE COMMUNITY SPECIFIC INDEX IN RESPECT OF THE PERIODS IN QUESTION HAS BEEN DONE IN ACCORDANCE WITH THE CRITERIA LAID DOWN IN THE DECISION OF 20 AND 21 MARCH 1972 .
45 FURTHER, IT HAS NOT BEEN ESTABLISHED THAT THE JOINT INDEX OF SALARIES REFERRED TO IN ARTICLE 65 OF THE STAFF REGULATIONS RESULTING FROM THE JOINT USE OF THE TWO INDICES PROVIDED FOR BY THIS DECISION IS SO UNREPRESENTATIVE AS TO MAKE IT INCOMPATIBLE WITH THE SAID ARTICLE .
46 THE ACTION MUST THEREFORE BE DISMISSED .