Council’s rejection of EU pay rise was justified, says ECJ

In a surprise judgment, the European Court of Justice in Luxembourg has ruled that the European Union’s Council of Ministers was legally entitled to refuse a 1.7% salary increase for European Union staff that the Commission proposed in 2011.

The Court on Tuesday (19 November) ordered the Commission to make a new proposal that takes into account the serious and sudden deterioration in economic conditions in the Union – the justification given by the Council in December 2011 for its rejection of the salary rise. The court’s judgment runs – unusually – counter to a legal opinion delivered in September by Yves Bot, an advocate general at the court.

The Commission each year proposes adjustments to the salaries and pensions of EU staff, employing a formula that tracks developments in the purchasing power of national civil servants in eight member states. This method, agreed with trade unions representing EU staff, is intended to ensure that EU salaries are roughly in line with those of national officials, and the Commission says it lacks the power to propose figures lower than those produced by the formula.

But in 2009 and 2011, the Council rejected the Commission’s proposal, on each occasion with different outcomes. In 2009, the member states refused to approve a 3.7% pay rise, which led to a court challenge against the member states by the Commission. The ECJ ruled in November 2010 that the Council had exceeded its powers in blocking the Commission’s proposal – it had

offered a 1.85% rise instead – and that the Council’s only margin of discretion over salary adjustments was to trigger an exception clause in case of a “serious and sudden deterioration in the economic situation” in the EU. In rejecting the 2009 rise, the Council had not invoked the clause; the court upheld the Commission’s complaint and the increase was paid.

The Council learned from its mistake and, in rejecting the 2011 increase, it invoked the exception clause. The Commission disputed the Council’s assessment of the economic conditions, and both sides brought their case to the ECJ. The ruling establishes that it was the Council’s task, not the Commission’s, to determine whether the economic environment justified triggering the exception clause – thus making it possible to block salary rises. The court also ruled that once that determination has been made, the Commission is obliged to make a new proposal based on the exception clause.

The ruling has limited implications beyond the 2011 salary rise. From 1 January 2014, new rules apply to staff pay, pensions and perks, limiting any move – up or down – in staff salaries to 2% a year, and, in times of crisis, imposing further limits to any increases in pay. Moreover, salaries have been frozen this year and next. The crisis clause has been made more automatic, so that disputes over who has the power to trigger it should be a thing of the past.

Günther Lorenz of the Union Syndicale, a staff union at the Council, said that staff were “shocked” by the judgment, which he described as “legally very difficult to understand” and “a primarily political ruling”. He said that the staff unions made their concessions to the member states on the staff reform on the assumption, shared by everyone, that the court would again side with the Commission. He called on the Commission again to propose a 1.7% rise for 2011.

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