OPINION OF ADVOCATE GENERAL

delivered on 14 November 1995 (*1)

Introduction

1.The present proceedings raise questions relating to the establishment of the Community budget and the division of powers between two institutions, Parliament and the Council, which constitute the budgetary authority. Specifically, the Court has to determine whether the two institutions lawfully exercised their powers — from the points of view in issue — in the procedure which ended with the declaration of the President of Parliament adopting the budget for 1995.

2.By its action of 17 February 1995, the Council has challenged the act by which, on 15 December 1994, the President of the Parliament declared the final adoption of the Community budget for 1995. (1) The Council asks the Court, pursuant to Article 173 of the EC Treaty and Article 146 of the EAEC Treaty, (2) to annul the contested act and accordingly declare the budget for 1995 invalid, whilst maintaining such measures implementing the budget as were adopted prior to the date of the judgment upholding the application.

3.The facts of this case may briefly be summarized as follows.

4.Parliament made changes to a number of headings of the 1995 budget, which had been approved on the first reading by the Council. The Council took the view that the headings in question related to compulsory expenditure, whereas Parliament reclassified them as noncompulsory expenditure and took the view that it had adopted with regard to those headings amendments and not proposed modifications pursuant to Article 203 of the Treaty, since proposed modifications relate to compulsory expenditure. As will be explained later, the Council for its part continued to regard the expenditure in question as compulsory and consequently treated the changes adopted by Parliament, not as amendments, but as proposed modifications, again because it regarded the expenditure in question as compulsory.

5.On 15 December 1994, the last act of the complex procedure for the adoption of the Community budget took place. During the debate in Parliament, and following the vote adopting Parliament's resolutions, the President-in-office of the Council, Mr Haller, declared as follows: ‘The Council's position in this matter was notified to Parliament by letter from its President of 2 December 1994 and by me in my statement of 13 December 1994. I am therefore obliged to tell you that the Council reserves the right to take whatever action it sees fit on this matter. I must also point out that the Council's agreement to the new rate for noncompulsory expenditure is given on the basis of the aforementioned position.’

Relevant legislation

6.The Community provisions to be considered in this context are those laid down by subparagraphs 4 to 10 of Article 203 of the Treaty. (5) Those provisions are concerned, as is well known, with the powers of the two institutions with regard to the establishment of the budget, prescribed majorities and the course of the procedure.

7.In limine, Parliament claims that the application is inadmissible in so far as it claims that the 1995 budget should be declared invalid. That claim — it argues — is inadmissible since it is pointless in that, if the Court annuls the act of the President of Parliament declaring the final adoption of the Community budget, the budget itself will become a nullity in any event.

8.The Council states in response that it asked the Court to declare the budget void simply as the direct, natural consequence of the annulment of the act of the President of Parliament and that therefore it cannot comprehend the reason — ‘the purport’, it states — of Parliament's objection of inadmissibility.

9.In my view, a clear answer to this point is to be found in the Court's case-law. I would refer to it, in so far as necessary in this context, merely in order to call to mind that it has been confirmed that ‘the effect of the annulment of the act of the President of the Parliament is to deprive the (...) budget of its validity’. (6) In view of this, it is — as the Court pointed out in the relevant judgment — unnecessary for the Court to give a decision ‘on the Council's claim for’ — as in this case — ‘the total annulment of the budget’.

10.Let us turn to the substance. The declaratory act of the President of Parliament is challenged on the ground that the budget which the President declared to have been adopted was not lawfully established. In the applicant's view, the Parliament acted ultra vires in changing budget estimates relating to compulsory expenditure, in respect of which it has no power to adopt amendments but only to propose modifications, which require, but in this case did not receive, the Council's approval.

11.More specifically, the Council's attack is two-pronged. It maintains that Parliament infringed the provisions conferring competence on the Council with regard to compulsory expenditure and the interinstitutional agreements which, in conformity with those provisions and pursuant thereto, specifically classified as compulsory the expenditure appertaining to the budget headings at issue: furthermore, it is claimed that the alleged infringement of the provisions of the agreements constitutes a failure to fulfil the duty of cooperation in good faith as between institutions.

12.Parliament answers this by stating, first of all, that it itself is competent, at the time of the second reading, to reclassify conclusively as noncompulsory expenditure whose nature is construed differently by the two arms of the budgetary authority. As for the claim that the 1993 Interinstitutional Agreement was infringed, Parliament maintains that that agreement classifies as noncompulsory expenditure relating to the headings under items 2 and 3 of the budget and leaves it open as to how expenditure relating to item 1 should be classified. The fact that the agreement is silent about the latter expenditure does not signify, however, that it is compulsory expenditure: in Parliament's contention, the fact that the institutions did not mention it merely shows that they were not in agreement as to its nature.

Furthermore, in Parliament's view, expenditure must be classified as compulsory or noncompulsory regard being had to the objective nature of the basic legislature measure which gives rise to it. What has to be done is to determine specifically, heading by heading, whether the basic measure is binding on the Commission in the management of expenditure or whether, in contrast, it confers the discretion characterizing expenditure as noncompulsory. Parliament takes the view that the classification adopted in 1982 has been overtaken by events (a) because the 1995 budget no longer corresponds to the budget headings considered in the 1982 Joint Declaration and (b) because, in any event, the 1993 Interinstitutional Agreement abrogated the classification of expenditure effected by the Joint Declaration.

11.In response to Parliament's arguments, the Council states for its part that expenditure cannot be classified unilaterally, but must be classified by agreement as between the two arms of the budgetary authority. As far as the instances in point are concerned, the 1982 Joint Agreement was not abrogated by the 1988 and 1993 Interinstitutional Agreements. In the Council's submission, it is not possible to argue from the fact that the 1993 Interinstitutional Agreement has nothing to say about expenditure relating to item 1 that that expenditure is no longer compulsory expenditure as provided by the 1982 Joint Declaration, if expenditure relating to item 1 were to be put into the category of noncompulsory expenditure, the applicant argues, this would make the 1993 Interinstitutional Agreement itself nugatory. Annex II to that agreement provides for a special collaboration procedure as between the institutions with regard to the amount of compulsory expenditure. Consequently, that procedure could not be implemented if expenditure relating to item 1 were to be held not to be compulsory, since it is the sole expenditure which is still compulsory.

Parliament's objections to the Council's arguments are not directed only against the criteria governing the classification of expenditure in abstracto. It alleges that the Council acquiesced in any event to the reclassification of the expenditure in question as noncompulsory by consenting, pursuant to Article 203 of the Treaty, to the maximum rate of increase being exceeded. The maximum rate of increase and the class of noncompulsory expenditure, to which the maximum rate is applied, are indissolubly linked; agreement relating to the determination of the maximum rate of increase exists precisely in so far as the Council declared itself to be in agreement with Parliament as to the compass of expenditure to which that specific rate should apply. Under the penultimate and the last subparagraphs of Article 203(9), the maximum rate of increase — hence the new rate which Parliament and the Council have to agree in so far as it exceeds the rate previously established — relates exclusively to noncompulsory expenditure. The determinative test for resolving this dispute is whether or not the two arms of the budgetary authority agreed on the maximum rate of increase.

Parliament adduces a number of different arguments in its defence in order to show that there was agreement on the maximum rate of increase in this instance and, as a result, agreement that the underlying classification of the expenditure was that of noncompulsory expenditure. In the first place, the President-in-office of the Council associated himself with the position adopted by Parliament by his declaration given in the chamber in the course of the debate on the second reading of the budget (reproduced above). Apart from this, during the parliamentary proceedings it could be clearly inferred from the President of the Council's attitude that he associated himself with the declaration made by the President of Parliament in finding that the budget had been adopted. The practice with regard to relations between the two institutions in the context of the establishment of the budget bears out Parliament's case. The Council is under an obligation — with which it has always complied in the past — to indicate in time and unambiguously any defects potentially entailing the invalidity of the act declaring the final adoption of the budget which falls to the President of Parliament. However, Parliament maintains that the Council did not do so in this case. The Council did not expressly reject Parliament's position, as it did on three previous occasions; instead, it associated itself, through its President-in-office, with the applause which followed the approval of the budget and the act of the President declaring that it had been adopted. Parliament considers that that attitude on the part of the Council bears the hallmarks of an act of interinstitutional courtesy: an expression of the comitas of a sovereign body vis-à-vis another, which however, the defendant argues, may also have legal effects, as witness the case-law of the International Court of Justice in the field of the ius gentium. The Council objects that Mr Haller, its President-in-office, was not authorized to go back on the position adopted by his institution and was therefore not in a position to accept the maximum rate of increase as allegedly derived from the reclassification of the expenditure in question by Parliament, which, in contrast, the Council contested. Parliament considers, however, that the President of the Council was competent in any event to interpret, externalize and exercise the will of the institution which he represented. It adds that the President of Parliament had to place his full confidence in the declaration made in the chamber by President Haller on the Council's behalf and had no reason to doubt that the Council's intention was to accept the new maximum rate of increase.

12.The applicant argues, however, that agreement on the maximum rate of increase can be regarded as having been lawfully reached only where there is agreement between the two arms of the budgetary authority as to the determination of noncompulsory expenditure, to which that rate is to apply. The fact that there was disagreement in identifying noncompulsory expenditure consequently means that the Council cannot have validly given its agreement to the maximum rate of increase. In any event, the Council maintains, there was no agreement on the maximum rate of increase in this case. President Haller sent Parliament the letter of 2 December 1994 and spoke in the chamber on 13 December that year in order, on both occasions, to contest the reclassification of the expenditure at issue as noncompulsory, and firmly warned Parliament of all the potential consequences if it did reclassify that expenditure. The Council goes on to state that the purport of the declaration made in the chamber at the end of the budget debate on 15 December 1994 was no different. On that occasion too, the Council stated that it could agree to the maximum rate of increase only ‘on the basis of the (...) position’ which it had already specified. Consequently, consent was lacking; consent would be forthcoming on condition that the expenditure classified as noncompulsory by Parliament was instead regarded as compulsory, with the result that the new maximum rate of increase would be calculated and applied on the basis of the expenditure resulting from the classification adhered to by the Council.

The Council also observes that the French translation of the declaration made by President Haller in German reads ‘le Conseil donne son accord’ where the original states ‘die Zustimmung des Rates (...) erfolgt’. Since the declaration of the President of the Council was dependent upon conditions which had not yet been satisfied, it should have been translated in the future tense: ‘l'accord du Conseil interviendra’. Parliament is relying on the use of the present tense in the French version as evidencing alleged present and unconditional agreement on the part of the Council to the maximum rate of increase. However, Parliament itself, the Council says, is bound to acknowledge that such agreement lacked the necessary precondition on account of the persistent disagreement as to the classification of the expenditure in question. If Parliament's interpretation of the declaration in question were to be accepted, it could not be regarded as being anything other than contradictory. The only possible way of interpreting it was to consider that President Haller's reference to the Council's stated position was clear and consistent: agreement could and would be reached only if Parliament accepted that position as to the nature of the disputed expenditure.

13.Lastly, the Council denies that President Haller acquiesced in the face of the conduct of Parliament and, in particular, its President when the latter declared that the budget had been approved. President Haller had acted duly, since the Council's tasks do not include interfering in the exercise of prerogatives which Article 203(7) of the Treaty confers exclusively on the President of Parliament. Furthermore, the Council maintains, manifestations of interinstitutional courtesy are not subject to judicial review.

Appraisal

14.How should the opposing arguments of the Council and Parliament be assessed? To simplify the issue, it may be stated that, in the final analysis, the dispute turns on the classification of a number of budget headings coming under the agricultural guideline and a further heading relating to fisheries agreements. If the expenditure provided for therein is not compulsory, it must be held, pursuant to Article 203, that the Parliament was competent to adopt definitively the amendments challenged in these proceedings and the budget must be regarded as having been duly approved. In contrast, if the expenditure falls to be classified as compulsory, the application is well founded.

Having put the issue in those terms, I would say straight away that the judgments delivered to date on the establishment of the Community budget do not directly consider and define the criteria for distinguishing between compulsory and noncompulsory expenditure. However, the Court has had occasion to specify what criterion — or rather what legal instrument — serves to distinguish between the two categories of expenditure.

15.What can be stated in the light of the case-law is that ‘the problems regarding the delimitation of noncompulsory 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 (...) and that they are capable of being resolved in that context’. The point of view thus stated by the Court is clear: recourse to the agreement between the institutions concerned must be made in order to disentangle problems of classification. In fact, the subject has been reserved to agreements between the Council and Parliament. There is now a series of such agreements. The first classification of expenditure harks back to the 1982 declaration. Subsequently, the three institutions which participate in establishing the budget adopted on 29 June 1988 an Interinstitutional agreement on budgetary discipline and improvement of the budgetary procedure and on 29 October 1993 the 1993 Interinstitutional Agreement.

The first of the two last-mentioned agreements does not deal with the distinction between the two categories of expenditure. The second does, but the provisions which it contains are interpreted differently by Parliament and the Council.

16.I shall now define the first — obvious — consequence of following in this case, as I believe is necessary, the criterion precisely set out in the case-law. The interinstitutional agreement is the legal means of actually classifying expenditure, the procedure which puts into effect the relevant provisions of the Treaty. If this is the case, Parliament was not entitled unilaterally to determine the nature of expenditure in respect of which it has the power to adopt amendments.

It is the agreement which determines, by identifying the nature of the expenditure, the substantive ambit — the precondition, one might say, — of the competence of the Council or of Parliament in establishing the budget at any given time. As has been seen in sections 10 and 11 above, the parties have put forward conflicting interpretations of the interinstitutional agreements which should have classified the expenditure in question. To my mind, it is unnecessary for the Court to inquire into the provisions of those agreements. It is sufficient, for the purposes of reaching a decision, to shift the inquiry to the other aspect of this case, namely whether or not agreement was reached on the new maximum rate of increase within the meaning of the last subparagraph of Article 203(9).

17.On close inspection, the applicant and the defendant agree on that very approach in putting across their opposing arguments. It is undisputed that agreement exists on the maximum rate only when agreement has been reached on the percentage increase and on the overall level of expenditure in relation to which that percentage increase has to be calculated. The percentage is fixed from time to time. The basis for the calculation is laid down by the Treaty. It is all expenditure not classified as compulsory. By agreeing on the rate, it is therefore determined how much and what expenditure is to be distinguished from other expenditure provided for in the budget. If there is no agreement because there is disagreement as to the classification of expenditure and so long as the question remains unresolved by agreement between the Council and Parliament, the budget cannot lawfully be established. The case-law has clarified this point and there is no need to go back over it.

Let us consider, therefore, whether, and if so on what terms, the Council gave or refused its agreement.

I shall start by examining the measure challenged in this action. That act, by which the President of Parliament declared the 1995 budget adopted, states as follows: ‘Despite divergent points of view on some areas, an agreement with the Council pursuant to Article 203 of the EC Treaty has been obtained on a new maximum increase rate. The budgetary procedure can therefore be brought to a successful conclusion.’ The President did not specify the matters to which the divergent points of view of the two institutions related nor the potential consequences thereof; he merely declared that, despite the differences in the positions of Parliament and the Council, agreement on the maximum rate of increase had been reached. It has to be seen on what basis that declaration may be justified. The argument put forward by the defendant is that the President of Parliament declared that the budget had been duly approved on the faith of what the President of the Council had declared at the sitting on 15 December 1994. We shall therefore have to reflect on that declaration.

The relevant point is that the Council — through the person representing it in Parliament's debating chamber — reserved, stressing the compulsory nature of the expenditure at issue, all its rights to protect its own position, including, therefore, that of asserting them before the Court. In point of fact, President Haller also stated: ‘Gleichzeitig möchte ich darauf hinweisen, daß die Zustimmung des Rates zu dem neuen Satz für die nicht obligatorischen Ausgaben auf der Grundlage der dargelegten Haltung des Rates erfolgt’. (14) It has already been seen how the parties have discussed the tenor of this declaration in their pleadings and at the hearing.

The defendant would turn the French translation of President Haller's words to account in order to infer that he consented to the maximum rate of increase when he actually made his declaration and did not defer this for a subsequent decision. However, the fact is that the Council's agreement to the maximum rate of increase was made expressly dependent on conditions which were not satisfied at that time. Ultimately, Parliament itself recognizes this when it states that the classification of the expenditure at issue could not be regarded as having been established pursuant to the 1993 Inter-institutional Agreement and consequently still had to be determined; in order to determine the classification it was necessary — and the Court's rulings leave no doubt as to this (15) — for there to be a new agreement between the two budgetary authorities. But no such agreement had been reached.

Nor am I persuaded by what Parliament claims with regard to the attitude of President Haller in the chamber in so far as he allegedly failed to contest the legality of the approval of the budget or even associated himself with external signs of endorsement or applause for that event. Parliament cannot reasonably require the President of another institution to exceed the limits of his own powers: (16) in the chamber, the President of the Council put forward express reservations with respect to Parliament's determinations and had no other bases or means for preventing it and its President for acting as they subsequently did.

Having said that, there remains the fact that President Haller was not even entitled to externalize in the chamber a position different from that which the Council had adopted with regard to the questions at issue here. He acted merely as the spokesman of that institution, putting across its point of view, which he was in no case authorized to revise or modify. (19) Neither is it possible to endorse Parliament's argument to the effect that the Council should have brought this action immediately after the approval of the budget was officially notified. The Council brought proceedings in the Court within the period prescribed by the Treaty: this is the only relevant consideration for the purposes of these proceedings.

In conclusion, I would set out the outcome to which the above considerations lead.

The express reference to the conditions on which agreement to the maximum rate of increase had to depend, as appears from President Haller's declaration, objectively rules out the possibility of the Council's having agreed with the classification of the expenditure at issue in the way intended by Parliament. The Council did not give Parliament its agreement to the classification on the basis of which the maximum rate of increase had to be calculated and applied.

The defect vitiating the act challenged by the Council and the budget as a whole ensues, as I have already mentioned, from the infringement of the principle that expenditure is classified as compulsory or noncompulsory only by agreement between the two institutions concerned. This absorbs every other ground put forward by the applicant in order to argue that Article 203 was infringed. Since there was no agreement on the noncompulsory nature of the expenditure on which Parliament passed the amendments, the precondition for holding that Parliament was legitimately entitled to adopt the amendments approved to the budget headings at issue fails to be satisfied. Consequently, the first plea is well founded.

Lastly, Parliament claims that the Council infringed the duty of cooperation in good faith between institutions. It should be considered that, thereby, Parliament is complaining that, on the one hand, the Council agreed to the rate and, on the other, denied agreement by refusing to accept Parliament's position with regard to the basis of the expenditure to which the maximum rate of increase necessarily had to apply. However, it has been seen that the Council refused, by means of appropriate declarations of intention, to agree to the rate, thus adopting, ipso fano, a position at odds with that of Parliament. For this very reason, the argument adumbrated in Parliament's defence to the effect that the action cannot succeed on account of the principle patere legem quam ipse fecisti or even that the Council had no interest in order to warrant it bringing proceedings (20) should be rejected. The alleged breach of obligations constituted by that conduct — in the terms in which it is formulated by the defendant — could not exist, moreover, independently of a failure to comply with the Treaty rules governing the establishment of the budget and laying down the respective powers of Parliament and the Council. (21) In refusing to agree to the classification of the expenditure, the Council exercised a power which it undoubtedly possessed. Its conduct was therefore lawful and not lacking in good faith. In this case, too, it is unnecessary to determine whether the unilateral classification of noncompulsory expenditure by Parliament conflicts — as the Council claims in another plea — with the provisions of the agreements concluded between the institutions concerned. Granting the most that can be granted of the defendant's argument, the most recent of those agreements, that of 1993, left the matter open as to how the expenditure and budget headings at issue are to be classified. What was necessary, therefore, was agreement and there was no agreement either on the new maximum rate of increase or on the related determination of compulsory expenditure. The contested act fails because it was brought into being in breach of the principle that there must be agreement, rather than because it was in breach of any particular agreement.

I would make one final observation about the fundamental importance of that principle in accordance with the Court's rulings. In national legal systems, agreements between authorities may constitute a means whereby the Constitutional system may supplement itself where they are used to fill possible lacunae inter alia by interpretation) in the provisions relating to the distribution of powers — particularly legislative powers — as between institutions whose independence is guaranteed equally by the Constitution.

In the Community system, interinstitutional agreements play a vital instrumental function for the purposes of establishing the budget which is of undoubted and conspicuous importance in the actual operation of the institutional system as a whole. Such agreements are intended to establish the boundary between Parliament's and the Council's powers over spending: whilst they do not supplement the basic provisions of the Treaty, they certainly do serve to implement them. Under the principle in question — and this is a choice which I would be so bold as to term Constitutional — the rank and position of the institutions having to apply that principle and comply with it are equal. Consequently, what is involved is a genuine manifestation of co-decision-making.

Let us consider, moreover, the overall budgetary procedure of which these particular rules on the consensual classification of expenditure form a part. Conceptually, it is the precursor, in so far as it confers on the institution representing the people the power to reject the draft budget, of the analogous final power of rejection given to Parliament by the procedure recently introduced by Article 189b of the Treaty, which is specifically described as co-decision-making. Admittedly, the principle of agreement is more broadly accepted in the context of that procedure: certo quodam modo it is emphasized by the fact that the Presidents of Parliament and the Council each sign the acts adopted.

In the budgetary procedure, the adoption of the act declaring the adoption of the budget is within the competence of the President of Parliament alone. But this does not alter the fact that the principle of agreement must be regarded as essential, since it governs the crucial stage of the procedure in which expenditure is classified, inter alia when the maximum rate of increase is set.

Failure to comply with that principle upsets the balance between the Council and Parliament which should apply during the establishment of the budget: it is this defect, undermining the lawfulness of the act of the President of Parliament declaring the adoption of the budget, which characterizes this case. In my Opinion, I have explained the approach which has already been taken by the case-law in order to assess the case in the light of this principle which ought to have been observed.

I conclude, therefore, by proposing that the act by which Parliament declared the 1995 budget approved should be annulled. This has the following consequences: since the budget is invalid, the relevant procedure must resume at the point at which the annulled act of the President of the Council took place.

Effects of annulment

The Council has also asked the Court to exercise the powers conferred on it by Article 174 of the EC Treaty. (22) It requests that budgetary implementation measures in being at the date on which judgment is given annulling the contested act should be maintained. (23) In the course of the proceedings, the Council expanded on this request by asking the Court to leave unaffected all the effects of the annulled budget until such time as Parliament and the Council finally adopt the Community budget for 1995. Parliament has not set out its position on this matter in its submissions.

For my part, I consider that the Council's request is amply justified on account of the importance of the budget in securing continuity in the activities of the Community. It deserves to be taken into account, having regard, among other things, to the difficulty of applying the system of one-twelfths of the budget, provided for in Article 204 of the Treaty. Twelfths of the budget would have to be calculated on the basis of the 1994 budget, which was established for a Community of twelve Member States, and then applied to a Community which has since been enlarged to fifteen States. I therefore propose that the Council's request, as reformulated at the hearing, should be upheld in accordance with the approach which the Court has taken in other cases. (24)

Costs

I propose that, pursuant to the first subparagraph of Article 69(3) of the Rules of Procedure, the parties should be ordered to pay their own costs in view of the institutional importance of the dispute and the questions of legal principle raised by the parties.

Conclusions

In view of the foregoing, I propose that the Court should:

—Declare the Council's application well founded and annul the act of the President of Parliament declaring the final adoption of the Community budget for 1995, with the result that, since the budget is invalid, the procedure for establishing the budget should resume at the point at which the relevant act of the President of Parliament took place;

—Maintain the effects of the annulled budget until such time as Parliament and the Council finally adopt the Community budget for 1995;

—Order the parties to bear their own costs.

*1 Original language: Italian.

1 OJ 1994 L 369, p. 1.

2 The Council has not based its action also on the analogous provisions of the ECSC Treaty. I nevertheless consider that under the case-law the action will lie. On the one hand, the Court has held that a challenge brought pursuant to a provision of one of the Treaties may be extended to cover the equivalent provision of another Treaty (‘The need for a complete and consistent review of legality requires [Article 173 of the EEC Treaty] to be construed as not depriving the Court of jurisdiction to consider, in proceedings for the annulment of a measure based on a provision of the EEC Treaty, a submission concerning the infringement of a rule of the EAEC or ECSC Treaties’: Case C-62/88 Greece v Council [1990] ECR I-1527). On the other, the Court has declared admissible actions coming within the ambit of more than one Treaty even where they were based on provisions of only one Treaty (‘if the contested measure relates simultaneously and indivisibly to the spheres of more than one Treaty, an action is admissible to the extent to which the jurisdiction of the Court and the remedies provided for by the relevant provisions of one of the Treaties are applicable to the measure in question’: Case C-222/83 Municipality of Differdange v Commission [1984] ECR 2889). The precedents, consisting of the judgment in Case C-34/86 Council v Parliament [1986] ECR 2155 and subsequent rulings concerning the budget, which were given having regard to the indivisible nature of the budget, reflecting the principle of its single and universal nature, also point in this direction.

3 Joint declaration of 30 June 1982 by the European Parliament, the Council and the Commission on various measures to improve the budgetary procedure (OJ 1982 C 194, p. 1).

4 Interinstitutional agreement of 29 October 1993 on budgetary discipline and improvement of the budgetary procedure (OJ 1993 C 331, p. 1).

5 Paragraphs 4 to 10 of Article 203 read as follows:

4.4 The draft budget shall be placed before the European Parliament not later than 5 October of the year preceding that in which the budget is to be implemented. The European Parliament shall have the right to amend the draft budget, acting by a majority of its members, and to propose to the Council, acting by an absolute majority of the votes cast, modifications to the draft budget relating to expenditure necessarily resulting from this Treaty or from acts adopted in accordance therewith. If, within 45 days of the draft budget being placed before it, the European Parliament has given its approval, the budget shall stand as finally adopted. If within this period the European Parliament has not amended the draft budget nor proposed any modifications thereto, the budget shall be deemed to be finally adopted. If within this period the European Parliament has adopted amendments or proposed modifications, the draft budget together with the amendments or proposed modifications shall be forwarded to the Council.

5.5 After discussing the draft budget with the Commission and, where appropriate, with the other institutions concerned, the Council shall act under the following conditions:

(a) The Council may, acting by a Qualified majority, modify any of the amendments adopted by the European Parliament;

(b) With regard to the proposed modifications:

— where a modification proposed by the European Parliament does not have the effect of increasing the total amount of the expenditure of an institution, owing in particular to the fact that the increase in expenditure which it would involve would be expressly compensated by one or more proposed modifications correspondingly reducing expenditure, the Council may, acting by a qualified majority, reject the proposed modification. In the absence of a decision to reject it, the proposed modification shall stand as accepted;

— where a modification proposed by the European Parliament has the effect of increasing the total amount of the expenditure of an institution, the Council may, acting by a qualified majority, accept this proposed modification. In the absence of a decision to accept it, the proposed modification shall stand as rejected;

— where, in pursuance of one of the two preceding subparagraphs, the Council has rejected a proposed modification, it may, acting by a qualified majority, either retain the amount shown in the draft budget or fix another amount.

The draft budget shall be modified on the basis of the proposed modifications accepted by the Council. If, within 15 days of the draft being placed before it, the Council has not modified any of the amendments adopted by the European Parliament and if the modifications proposed by the latter have been accepted, the budget shall be deemed to be finally adopted. The Council shall inform the European Parliament that it has not modified any of the amendments and that the proposed modifications have been accepted. If within this period the Council has modified one or more of the amendments adopted by the European Parliament or if the modifications proposed by the latter have been rejected or modified, the modified draft budget shall again be forwarded to the European Parliament. The Council shall inform the European Parliament of the results of its deliberations.

10.10 Each institution shall exercise the powers conferred upon it by this Article with due regard for the provisions of the Treaty and for acts adopted in accordance therewith, in particular those relating to the Communities' own resources and to the balance between revenue and expenditure.’

6.6 Within 15 days of the draft budget being placed before it, the European Parliament, which shall have been notified of the action taken on its proposed modifications, may, acting by a majority of its members and three-fifths of the votes cast, amend or reject the modifications to its amendments made by the Council and shall adopt the budget accordingly. If within this period the European Parliament has not acted, the budget shall be deemed to be finally adopted.

7.7 When the procedure provided for in this Article has been completed, the President of the European Parliament shall declare that the budget has been finally adopted.

8.8 However, the European Parliament, acting by a majority of its members and two-thirds of the votes cast, may, if there are important reasons, reject the draft budget and ask for a new draft to be submitted to it.

9.9 A maximum rate of increase in relation to the expenditure of the same type to be incurred during the current year shall be fixed annually for the total expenditure other than that necessarily resulting from this Treaty or from acts adopted in accordance therewith. The Commission shall after consulting the Economic Policy Committee, declare what this maximum rate is as it results from:

— the trend, in terms of volume, of the gross national product within the Community;

— the average variation in the budgets of the Member States;

— the trend of the cost of living during the preceding financial year.

The maximum rate shall be communicated, before 1 May, to all the institutions of the Community. The latter shall be required to conform to this during the budgetary procedure, subject to the provisions of the fourth and fifth subparagraphs of this paragraph.

If, in respect of expenditure other than that necessarily resulting from this Treaty or from acts adopted in accordance therewith, the actual rate of increase in the draft budget, established by the Council is over half the maximum rate, the European Parliament may, exercising its right of amendment, further increase the total amount of that expenditure to a limit not exceeding half the maximum rate.

Where the European Parliament, the Council or the Commission consider that the activities of the Communities require that the rate determined according to the procedure laid down in this paragraph should be exceeded, another rate may be fixed by agreement between the Council, acting by a qualified majority, and the European Parliament, acting by a majority of its members, and three-fifths of the votes cast.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0007" href="#c-ECRCJ1995ENA.1200441301-E0007">6</a> </span>) Case 34/86 <span class="italic">Council</span> v <span class="italic">Parliament</span>, cited in footnote 2.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0008" href="#c-ECRCJ1995ENA.1200441301-E0008">7</a> </span>) Parliament expressly refers to the judgment of the International Court of Justice in the case of the Temple of Préah Vihéar ICJ 1962 64 and the judgment on the Arbitration award made by the King of Spain on 23 December 1906 ICJ 1910 192.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0009" href="#c-ECRCJ1995ENA.1200441301-E0009">8</a> </span>) In fact, the judgment in Case <a href="http://eur-lex.europa.eu/query.html?DN=61986??0204&amp;locale=EN" onclick="target='CourtTab';">204/86 <span class="italic">Greece</span> v <span class="italic">Council</span> [1988] ECR 5323</a> considered whether certain budget headings could legitimately be classified as compulsory. However, the Court inferred the nature of the relevant expenditure from detailed data characterizing it, but did not lay down general criteria for actually classifying them correctly.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0010" href="#c-ECRCJ1995ENA.1200441301-E0010">9</a> </span>) Case 34/86 <span class="italic">Council</span> v <span class="italic">Parliament</span>, cited in footnote 2.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0011" href="#c-ECRCJ1995ENA.1200441301-E0011">10</a> </span>) The institutional process which culminated in the 1982 declaration is described by Advocate General Mancini in his Opinion, to which I would refer, on Case 34/86 <span class="italic">Council</span> v <span class="italic">Parliament</span>, in which the judgment which I have already cited was given.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0012" href="#c-ECRCJ1995ENA.1200441301-E0012">11</a> </span>) <a href="./../../../../legal-content/EN/AUTO/?uri=OJ:L:1988:185:TOC" hreflang="en" onclick="target='CourtTab';">OJ 1988 L 185, p. 33</a>.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0013" href="#c-ECRCJ1995ENA.1200441301-E0013">12</a> </span>) The following provisions of the 1993 Interinstitutional Agreement warrant particular attention:

‘III. IMPROVEMENT OF THE BUDGETARY PROCEDURE

The institutions undertake to provide appropriations in the budget to honour the Communities' internal and external legal obligations and policy commitments, with due regard for budgetary discipline and the fourth subparagraph of paragraph 13.

The European Parliament, the Council and the Commission confirm the principles and mechanisms concerning the agricultural guideline in accordance with the conclusions of the Edinburgh European Council. The institutions agree that all expenditure under headings 2 and 3 of the financial perspective is noncompulsory expenditure.

They agree to set up a procedure for interinstitutional collaboration in the budgetary sector. The details of this collaboration are set out in Annex II which forms an integral part of this Agreement.

The two arms of the budgetary authority agree to accept for each of the financial years from 1993 to 1999, the maximum rates of increase for noncompulsory expenditure deriving from the budgets established within the ceilings set by the financial perspective.’

‘Statement on the budgetary procedure provisions of the Treaty (Third subparagraph of paragraph 16)

The institutions consider that the budgetary procedure provisions of the Treaty, including the arrangement relating to compulsory and noncompulsory expenditure, should be reviewed at the Intergovernmental Conference scheduled for 1996 in order to achieve interinstitutional cooperation on a partnership basis.’

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0014" href="#c-ECRCJ1995ENA.1200441301-E0014">13</a> </span>) Case 34/86 <span class="italic">Council</span> v <span class="italic">Parliament</span>, cited above, and Case 204/86 <span class="italic">Greece</span> v <span class="italic">Council</span>, cited in footnote 8.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0015" href="#c-ECRCJ1995ENA.1200441301-E0015">14</a> </span>) Translation in section 4, above.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0016" href="#c-ECRCJ1995ENA.1200441301-E0016">15</a> </span>) See Case 204/86 <span class="italic">Greece</span> v <span class="italic">Council</span>, cited in footnote 8.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0017" href="#c-ECRCJ1995ENA.1200441301-E0017">16</a> </span>) Suffice it to refer in this connection to Article 4(1) of the Treaty, which provides that ‘Each institution shall act within the limits of the powers conferred upon it by this Treaty’.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0018" href="#c-ECRCJ1995ENA.1200441301-E0018">17</a> </span>) Case <a href="http://eur-lex.europa.eu/query.html?DN=61986??0068&amp;locale=EN" onclick="target='CourtTab';">68/86 <span class="italic">United Kingdom</span> v <span class="italic">Council</span> [1988] ECR 855</a>, where it is stated that ‘the rules regarding the manner in which Community institutions arrive at their decisions are laid down in the Treaty and are not at the disposal of the Member States or of the institutions themselves’.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0019" href="#c-ECRCJ1995ENA.1200441301-E0019">18</a> </span>) The Council has asked that the effects of the budget should be maintained on the basis solely of Article 174 of the EC Treaty, without referring to the similar provision of Article 147 of the ECSC Treaty. For the reasons set out in footnote 2 with regard to the possibility of extending the effects of an action for annulment brought pursuant to the provisions of one Treaty also for the purposes of corresponding provisions of the other Community Treaties, I likewise consider that the basis of Article 174 of the EC Treaty is sufficient to bring the question of maintaining the effects of the budget, irrespective as to the Treaty concerned, within the competence of the Court.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0020" href="#c-ECRCJ1995ENA.1200441301-E0020">19</a> </span>) According to its wording, Article 174 provides that the Court may state the effects of the annulled act which are to be considered as definitive only in the case of regulations. The case-law of the Court has extended, by analogy, the application of Article 174 to acts other than regulations in numerous judgments which have, inter alia, provided that effects should be maintained in the case of directives (Case <a href="http://eur-lex.europa.eu/query.html?DN=61990C?0295&amp;locale=EN" onclick="target='CourtTab';">C-295/90 <span class="italic">Parliament</span> v <span class="italic">Council</span> [1992] ECR I-4193</a> and Case <a href="http://eur-lex.europa.eu/query.html?DN=61994C?0021&amp;locale=EN" onclick="target='CourtTab';">C-21/94 <span class="italic">Parliament</span> v <span class="italic">Council</span> [1995] ECR I-1827</a>) and in budgetary matters (Case 34/86 <span class="italic">Council</span> v <span class="italic">Parliament</span>, cited above, and Case <a href="http://eur-lex.europa.eu/query.html?DN=61990C?0284&amp;locale=EN" onclick="target='CourtTab';">C-284/90 <span class="italic">Council</span> v <span class="italic">Parliament</span> [1992] ECR I-2277</a>). I therefore consider that, since the point is now undisputed in the case-law, there is nothing to prevent the application of Article 174 also in this case.

(<span class="note"> <a id="t-ECRCJ1995ENA.1200441301-E0021" href="#c-ECRCJ1995ENA.1200441301-E0021">20</a> </span>) Case C-295/90 <span class="italic">Parliament</span> v <span class="italic">Council</span>, cited in footnote 23, Case <a href="http://eur-lex.europa.eu/query.html?DN=61992C?0388&amp;locale=EN" onclick="target='CourtTab';">C-388/92 <span class="italic">Parliament</span> v <span class="italic">Council</span> [1994] ECR I-2067</a> and Case C-21/94 <span class="italic">Parliament</span> v <span class="italic">Council</span>, cited in footnote 23.