Important legal notice

61987C0307

European Court reports 1989 Page 00125

Opinion of the Advocate-General

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My Lords,

1 . Mrs Klein was an official of the Commission in Grade LA 4 and her husband, Mr Lorentzen, was an official of the Council in Grade LA 5 . As they had no dependent children and the salary of each of them was in excess of the specified minimum, they did not originally qualify for household allowance under Article 67 of and Annex VII, Article 1(3 ), to the Staff Regulations . With effect from 1 May 1986 the Commission awarded Mrs Klein an invalidity pension under Article 78 of the Staff Regulations, whereupon her husband became entitled to household allowance, which was duly paid to him by the Council from then on .

2 . With effect from 1 October 1986 Mr Lorentzen was allowed to leave the Council under the terms of Regulation No 3518/85 of 12 December 1985 introducing special measures to terminate the service of officials of the European Communities as a result of the accession of Spain and Portugal ( Official Journal 1985, L 335, p . 56 ). That regulation authorized the Community institutions "to adopt measures terminating the service of" certain officials ( Article 1 ) and provided that officials affected by such a measure should "be entitled to a monthly allowance equal to 70% of the basic salary for the grade and step held at the time of departure" ( Article 4(1 ) ). Article 4(5 ) of the Regulation provides : "Under the conditions set out in Article 67 of the Staff Regulations and Articles 1, 2 and 3 of Annex VII to the Staff Regulations, family allowances shall be payable ... to the recipient of the allowance provided for in paragraph 1 ...; the household allowance shall be calculated by reference to that allowance ". On the other hand, Article 81 of the Staff Regulations provides : "A person entitled to ... an invalidity pension ... shall be entitled, under the conditions laid down in Annex VII, to the family allowances specified in Article 67; the household allowance shall be calculated by reference to the pension of the recipient ". The question therefore arose whether the household allowance should continue to be paid to the husband on the basis of his allowance under Regulation No 3518/85 or whether that payment should cease and the household allowance should be paid to the wife by reference to the amount of her invalidity pension . The latter would have resulted in a significantly higher payment .

3 . By a letter dated 1 November 1986, Mrs Klein asked the Commission to pay the household allowance to her as from 1 October 1986 . By a letter dated 17 December 1986 the Commission refused . By a complaint under Article 90(2 ) of the Staff Regulations apparently received on 4 March 1987, Mrs Klein repeated her request; and by a decision taken on 1 July 1987 and notified by a letter dated 10 July 1987 the Commission rejected that complaint . By an application lodged at the Court on 8 October 1987 Mrs Klein claimed the annulment of the Commission' s decision of 17 December 1986 refusing her the household allowance and, so far as necessary, the annulment of the decision of 1 July 1987 rejecting her complaint, and she asked for costs .

4 . The entitlement of both husband and wife to household allowance is governed by Article 1 of Annex VII to the Staff Regulations, which applies to the wife by virtue of Article 81 of the Staff Regulations and to the husband by virtue of Article 4(5 ) of Regulation No 3518/85 . Article 1(3 ) of Annex VII provides :

"If the spouse of an official is gainfully employed, with an annual income before deduction of tax, of more than the basic annual salary of an official in the third step of Grade C3, weighted at the rate for the country where the spouse carries out his or her occupation, the official entitled to the household allowance shall not receive this allowance save by special decision of the appointing authority ...".

Article 1(4 ) of Annex VII provides :

"In cases where, under the foregoing provisions, a husband and wife employed in the service of the Communities are both entitled to the household allowance, this shall be payable only to the person whose basic salary is the higher ."

5 . Applying Article 1(4 ), mutatis mutandis, to the case of herself and her husband, Mrs Klein argues that because her invalidity pension is higher than her husband' s allowance under Regulation No 3518/85, the household allowance should be paid to her by reference to her invalidity pension as from 1 October 1986, the date when her husband became entitled to an allowance under Regulation No 3518/85 .

6 . The Commission, on the other hand, argues in substance that Mr Lorentzen has to be treated as "gainfully employed" within the meaning of Article 1(3 ) of Annex VII with the result that Article 1(3 ) operates to bar Mrs Klein' s entitlement to the household allowance . The issue in the case is therefore whether being in receipt of an allowance under Regulation No 3518/85 can be considered as being "gainfully employed" within the meaning of Article 1(3 ) of Annex VII to the Staff Regulations .

8 . The Commission argues, however, that Article 1(3 ) was designed to make an official' s entitlement to household allowance subject to the condition that the official' s spouse should not be in receipt of income exceeding a certain amount from an occupational origin . It submits that in accordance with that purpose Article 1(3 ) should be read as extending, beyond income arising from actual present employment, to include income relating to work although not directly arising from work, such as social security sickness benefits, salary paid while an official is on sick leave, unemployment benefit, redundancy benefit, early retirement pension or allowances paid to officials in the context of special measures terminating the service of officials as a result of the accession of new Member States . The true intention of the legislator was to withhold the household allowance from officials without dependent children where their spouse had occupational income exceeding a certain amount . The phrase "gainfully employed" refers to the most frequent case of occupational income, but was not intended to exclude rarer cases such as sick pay, early retirement pension or allowances paid to officials in the context of special measures terminating the service of officials as a result of the accession of new Member States . A literal reading of Article 1(3 ) would lead to results contrary to the intention of the legislator and to the principle of equality . For example, on a literal reading, a married couple of officials in Category A and without dependent children would not be entitled to household allowance while both were on active employment but would become entitled to it if one of them took an allowance under Regulation No 3518/85, although the couple would still be earning far more than a couple of officials in Grade C4 or a couple where the spouse was earning, in the private sector, a salary slightly above the threshold specified in Article 1(3 ).

9 . I do not consider that interpreting Article 1(3 ) literally would result in a breach of the principle of equality, as the Commission contends . That would be the case where similar situations were treated differently, but in the examples given by the Commission the situations are different : whether as an official or in the private sector, the spouse in the examples is in active employment, whereas the measure adopted under Regulation No 3518/85 in relation to the spouse in the present case is one which definitively terminates employment .

10 . Whilst I can see some force in the argument that Article 1(3 ) was intended to catch some forms of income other than income arising from actual present employment, it is my view that a reading as broad as that contended for by the Commission cannot stand in the face of the clear wording of that provision . Article 1(3 ) refers in the English version to a person being "gainfully employed" and in the French version to a person who "exerce une activité professionnelle lucrative ". As I read them, those expressions clearly put exclusive emphasis on the present and actual carrying out of work as the source of the income . The words are too clear to be overridden by an interpretation such as that advanced by the Commission .

11 . Even if it were accepted that Article 1(3 ) should be deemed to extend to some forms of what the Commission describes as "replacement income", the proper scope of such an extension is quite unclear . Whilst it might be possible to maintain that sick pay during a temporary illness could be regarded as "replacement income", because the employment relationship subsists, other sources of income raise greater difficulties . Thus, whilst the Commission appears to accept that retirement pensions and invalidity pensions are outside the scope of Article 1(3 ), it argues that early retirement pensions should be treated as being within its ambit, but it is difficult to see on what grounds retirement pensions should be excluded whilst early retirement pensions would be included . Moreover, it is not clear that early retirement pensions available under national law can be equated with the allowance granted under Regulation No 3518/85, in particular as they have different purposes . Argument has been addressed in this case to possible similarities and possible differences between retirement pensions and early retirement payments for the purposes of national law and for the purposes of Regulation No 1408/71, but it is unclear how far they are relevant in the different context of the Staff Regulations . These difficulties indicate to my mind that redefinition of the scope of Article 1(3 ), if appropriate, is a matter to be dealt with by way of legislation rather than case-law, because if decided by way of case-law it would risk creating an unacceptable degree of legal uncertainty .

12 . In any event, I would not accept that the allowance paid under Council Regulation No 3518/85 could be categorized as "replacement income" as I understand that term . The regulation provides for "measures terminating the service of officials", i.e . the definitive termination of work, as the French version (" cessation définitive de fonctions ") makes particularly clear . In such circumstances there can be no question of replacing earned income, because the working relationship has come to an end . The fact that an official has the option under Article 4(7 ) of the Regulation to continue making payments towards a retirement pension does not in my view affect that conclusion .

13 . The Commission also suggests that Article 1(3 ) of the Annex should not be read literally because it was drafted before measures terminating the service of officials upon accession of new Member States ( such as those in Regulation No 3518/85 ) had ever been adopted, as the rule which is now contained in Article 1(3 ) was first enacted in the Staff Regulations in 1962 . However, in their present version, the Staff Regulations have been amended some 46 times . The main features of the wording of Article 1(3 ) of Annex VII to the Staff Regulations, in particular, date from an amendment introduced in 1973 : by Regulation No 558/73 of 26 February 1973 ( Official Journal 1973, L 55, p . 1 ). That amendment was adopted shortly after the first enlargement of the Communities when a regulation providing for special measures to terminate the service of officials upon the accession of new Member States had just been adopted for the first time : Regulation No 2530/72 of 4 December 1972 ( Official Journal, English Special Edition 1972 ( 1-8 December ), p . 11 ). It would have been quite possible to provide for the situation in the 1973 amendment of Article 1(3 ) or in subsequent amendments to the Staff Regulations, particularly on the occasion of the two subsequent enlargements of the Communities in 1981 and 1986 . Alternatively, special provision could have been made, had that been thought necessary, in the regulations providing for special measures terminating the service of officials as a result of the accession of new Member States, in particular Regulation No 3518/85 at issue in the present case . Neither type of amendment has been adopted, notwithstanding the numerous opportunities to do so which there have been since measures for terminating the service of officials on the accession of new Member States were first introduced . Accordingly, it seems to me that the Commission' s argument based on the antiquity of the rule in question has no force .

14 . The decisive consideration, in my opinion, is that the language of Article 1(3 ) of Annex VII is clear and unambiguous, and that officials are entitled to rely on the clear terms of the regulations as they stand . In my view, an official, such as Mr Lorentzen, in receipt of an allowance under Regulation No 3518/85 cannot be treated as being "gainfully employed" so as to fall within the ambit of Article 1(3 ) of Annex VII . That provision is inapplicable to the present case, which therefore falls to be dealt with pursuant to Article 1(4 ) of the Annex, under which Mrs Klein is entitled to the household allowance calculated by reference to the amount of her invalidity pension as from 1 October 1986 .

15 . Accordingly, in my opinion, the Commission decision of 17 December 1986 refusing to grant her the household allowance should be annulled, and she should be awarded her costs .

(*) Original language : English .