## JUDGMENT No. 2005-3 — Administrative Tribunal of the International Monetary Fund (Section 1 & 2) ## Source details **Canonical URL:** [JUDGMENT No. 2005-3 — Administrative Tribunal of the International Monetary Fund (Section 1 & 2)](https://www.imf.org/-/media/files/imfat/j2005-3.pdf) ## Other formats - [Markdown version](/-/media/files/imfat/j2005-3.pdf.md) - [Structured JSON version](/-/media/files/imfat/j2005-3.pdf.json) --- ### Introduction and Procedural Posture - Tribunal composition and meeting dates: - Judges: Stephen M. Schwebel, President; Nisuke Ando and Michel Gentot, Associate Judges. - The Tribunal met on December 5 and 6, 2005. - Applicants and challenged decision: - Seven staff members filed seven identical Applications contesting the Executive Board’s January 24, 2005 decision expanding the range of discretion in setting annual staff compensation. - Respondent’s Motion: - Respondent filed a Motion for Summary Dismissal asserting Applicants failed to meet Article II, Section 1(a) of the Tribunal’s Statute that a staff member may only challenge an administrative act “adversely affecting” him. - Filing of the Motion suspended the period for answering the Applications; the Tribunal’s consideration at this stage was limited to admissibility. ### Procedure and Case Management - Key procedural chronology: - April 25, 2005: Applicants filed seven identical Applications with the Administrative Tribunal. - May 6, 2005: Tribunal denied Applicants’ requests for waiver of the statute of limitations to file amended Applications. - May 6, 2005: Applications transmitted to Respondent; Respondent invited to file a single Answer. - May 10, 2005: Registrar circulated a notice summarizing the issues raised pursuant to Rule IV, para. (f). - June 8, 2005: Respondent filed a Motion for Summary Dismissal pursuant to Rule XII; motion transmitted to each Applicant on June 9, 2005. - July 12, 2005: Applicants filed a joint Objection to the Motion pursuant to Rule XII, para. 5. - Oral proceedings: - The Tribunal decided not to hold oral proceedings on the Motion for Summary Dismissal. ### Factual Background: Compensation System and January 2005 Decision - Historical and review background: - 1989: Fund and World Bank adopted a revised compensation system following consideration by the Joint Fund and Bank Committee of Executive Directors on Compensation. - 1998–2000: The Fund’s compensation system underwent an extensive review to further staffing objectives and ensure salaries remained appropriately related to comparator markets. - The Executive Board annually decides adjustments to align the Fund’s salary structure with comparator markets. - January 24–25, 2005 decision and announcement: - January 24, 2005: Executive Board decided to modify the compensation system; this modification is the subject of the Applications. - January 25, 2005: Director of Human Resources notified staff that the Executive Board had amended the salary-setting system and that the amendments “have the effect of expanding the circumstances under which management and the Executive Board can exercise discretion in setting this year’s annual salary increase.” - Announcement text excerpts: - The change “makes it possible for judgment on the size of the structural increase to be exercised when the payline for the Fund falls within the 10-20 percent testing range for international competitiveness, as well as when it falls outside the testing range.” - “However, the extent of such discretion within the testing range is constrained—unlike the discretion that has been available outside the range—and must continue to be based on an evaluation of the factors bearing on the international competitiveness of Fund salaries.” - “Moreover, no consideration has yet been given to whether or how such discretion would be exercised in determining the salary increase for this year; those decisions will be taken up by Executive Directors during the annual salary review in March.” - March 30, 2005 corrective action and effect: - Following discovery of two errors in comparator data used in the 2004 compensation review, the Executive Board approved a supplementary increase in the Fund’s salary structure of two percentage points, with effect from May 1, 2004. - Effect of the correction: - The 2004 U.S.-indicated increase was placed within the testing range by the correction. - The retroactive adjustment placed the Fund’s 2004 salary structure two percentage points higher relative to the U.S. comparator, increasing the base for the 2005 market comparison and lowering the amount of increase indicated by the U.S. market for 2005. - Result: “the structural increase actually called for by the amended compensation system, as approved in the 2005 compensation round, did not differ from the increase that would have been called for under the system existing prior to its January 2005 amendment.” ### Channels of Administrative Review and Timeliness - Statutory filing window for regulatory decisions: - Article VI, Section 2 of the Tribunal’s Statute: an application challenging the legality of a “regulatory decision” may be filed within three months of its announcement or effective date; no administrative review channels need be exhausted for regulatory decisions challenged directly. - Relevant dates: - The contested Executive Board decision was announced to staff on January 25, 2005. - Applicants filed Applications on April 25, 2005. ### Parties’ Principal Contentions — Merits and Admissibility - Applicants’ contentions on the merits: - The January 24, 2005 decision fails to comply with the Fund’s “rules-based” compensation system and is contrary to the Fund’s internal law and established past practice, creating legitimate expectations for staff. - The decision is contrary to general principles of international administrative law and infringes Applicants’ terms and conditions of employment. - The decision is not based on objective analysis and fails to support international competitiveness of staff salaries as required by the Fund’s Articles of Agreement. - The decision is arbitrary and an abuse of discretion. - Respondent’s contentions on admissibility: - The January 24, 2005 decision, which allowed greater discretion for the subsequent structural salary adjustment for 2005, had no adverse financial consequences for Applicants in the 2005 compensation review. - Applicants have not shown any other adverse effect flowing from the decision; other alleged effects are abstract and hypothetical and conflate adverse effect with the merits. - Applicants have failed to establish any foreseeable and definite adverse effect resulting from the contested decision, as required for admissibility under the Statute. - Applicants’ contentions on admissibility: - Regulatory decisions differ from individual decisions with respect to “adverse effects”; widening discretionary powers affects the balance of interests between Management and staff and opens the door for more specific decisions affecting staff rights. - The Executive Board’s intention in amending the compensation system was to lower the amount of increase indicated by the U.S. market in 2005 to a level not permissible prior to January 2005; the absence of adverse financial consequences in 2005 resulted from discovery of data errors in the 2004 exercise. - The contested decision gives rise to foreseeable and definite adverse effects on Applicants’ individual legal situations because the widening of the Executive Board’s discretion affects terms and conditions of employment. ### Tribunal’s Consideration of Admissibility - Jurisdictional and precedent principles: - The Tribunal’s jurisdiction covers review of “individual decisions” and “regulatory decisions”; applicants must demonstrate being “adversely affected” by the contested decision per Article II, Section 1(a). - Precedent cited: IMFAT Judgment No. 2002-3 (December 18, 2002) and the Commentary on the Tribunal’s Statute emphasize that an applicant must have an actual stake and that the Tribunal is not to resolve hypothetical questions or issue advisory opinions. - Threshold assessment and legal standard for summary dismissal: - An application may be summarily dismissed only “if it is clearly inadmissible” (Rule XII). - International administrative jurisprudence cited supports receivability of challenges to regulatory decisions when a reasonable presumption exists that the decision will bring injury even if no present injury has occurred (e.g., Ayoub (No. 2), ILOAT Judgment No. 986 (1989); Aelvoet (No. 6) and others, ILOAT Judgment No. 1712 (1998)). - Tribunal’s conclusion on admissibility threshold: - The widening of the Fund’s discretion to adjust compensation is sufficient to establish a non-hypothetical stake for Applicants at the admissibility stage. - The Applications are not clearly inadmissible on the ground asserted by Respondent. ### Tribunal's assessment of "present effect" - Finding of present effect: - The Tribunal finds that, in respect of the Applications before it, there is “some present effect.” - That effect arises from the wider discretion that the Executive Board has assumed in respect of salary adjustments which, in the absence of further action by the Executive Board, will be applied in 2006. - Procedural consequence: - On that basis, the Tribunal concludes the Applications are not “clearly inadmissible,” and therefore denies the Fund’s Motion for Summary Dismissal of the Applications. ### Support from the Executive Board Report - Report guidance cited: - The Tribunal cites the Report of the Executive Board on the Statute of the Tribunal emphasizing the utility of affording staff the right directly to challenge regulatory decisions within three months of their announcement or effective date. - Quoted passage from the Report: - “Regulatory decisions could be challenged by adversely affected staff within three months of their announcement or effective date. It is considered useful to permit the direct review of regulatory decisions within this limited time period. As a result, the question of legality, and any related issues (such as interpretation or application) could hopefully be firmly resolved before there had been considerable reliance on, or implementation of, the contested decision.” (Report of the Executive Board, p. 25.) - The Report contemplates resolving legality of regulatory decisions “... before there has been considerable reliance on, or implementation of, the contested decision.” ### Procedural outcome and schedule - Immediate procedural orders: - The Fund’s Motion for Summary Dismissal is denied. - The exchange of pleadings pursuant to Rules VIII – X of the Tribunal’s Rules of Procedure will resume. - The filing of the Motion had suspended the time for answering the Applications until the Motion was acted on by the Tribunal (Rule XII, para. 2.). - Following denial of the Motion, the procedural sequence will continue: the Fund’s Answer on the merits, Applicants’ Reply, and the Fund’s Rejoinder will follow according to the schedule prescribed by the Rules. ### Decision and signatures - Decision: - The Administrative Tribunal of the International Monetary Fund unanimously decides that the Fund’s Motion for Summary Dismissal is denied. - Signatures and formalities: - Signed by Stephen M. Schwebel, President; Nisuke Ando, Associate Judge; Michel Gentot, Associate Judge; and Celia Goldman, Registrar. - Decision location and date: Washington, D.C.; December 6, 2005. *Administrative Tribunal of the International Monetary Fund, Decision dated December 6, 2005.* ### Section 1 ### JUDGMENT No. 2005-3 — Administrative Tribunal of the International Monetary Fund (Section 1) ### Introduction and Procedural Posture - On December 5 and 6, 2005, the Administrative Tribunal of the International Monetary Fund, composed of Judge Stephen M. Schwebel, President, and Judges Nisuke Ando and Michel Gentot, Associate Judges, met to adjudge the matter brought by seven staff members. - Applicants filed seven identical Applications contesting the IMF Executive Board’s January 24, 2005 decision expanding the range of discretion in setting annual staff compensation. - Respondent filed a Motion for Summary Dismissal contending Applicants have not met Article II, Section 1(a) of the Tribunal’s Statute that a staff member may only challenge the legality of an administrative act “adversely affecting” him. - The filing of the Motion for Summary Dismissal suspended the period for answering the Applications; the Tribunal’s consideration at this stage is limited to admissibility. ### Procedure and Case Management - April 25, 2005: Applicants filed seven identical Applications with the Administrative Tribunal. - May 6, 2005: The Tribunal denied Applicants’ requests for waiver of the statute of limitations to file amended Applications. - May 6, 2005: Applications were transmitted to Respondent; Respondent invited to file a single Answer. - May 10, 2005: Registrar circulated within the Fund a notice summarizing the issues raised in the Applications pursuant to Rule IV, para. (f). - June 8, 2005: Respondent filed a Motion for Summary Dismissal pursuant to Rule XII of the Tribunal’s Rules of Procedure; motion transmitted to each Applicant on June 9, 2005. - July 12, 2005: Applicants filed a joint Objection to the Motion pursuant to Rule XII, para. 5. - The Tribunal decided not to hold oral proceedings on the Motion for Summary Dismissal. ### Factual Background: Compensation System and January 2005 Decision - 1989: Fund and World Bank adopted a revised compensation system following consideration by the Joint Fund and Bank Committee of Executive Directors on Compensation. - 1998–2000: The Fund’s compensation system was extensively reviewed to further staffing objectives and ensure salaries remained appropriately related to comparator markets. - The Executive Board annually decides on adjustments needed to align the Fund’s salary structure with comparator markets. - January 24, 2005: The Executive Board decided to modify the compensation system; the January 2005 modification is the subject of the Applications. - January 25, 2005: Director of Human Resources emailed staff announcing the Executive Board’s decision and stating, inter alia: - “... After considering a number of options, the Executive Board decided to amend the current salary-setting system....” - The amendments “have the effect of expanding the circumstances under which management and the Executive Board can exercise discretion in setting this year’s annual salary increase.” - “The change agreed by the Executive Board today makes it possible for judgment on the size of the structural increase to be exercised when the payline for the Fund falls within the 10-20 percent testing range for international competitiveness, as well as when it falls outside the testing range.” - “However, the extent of such discretion within the testing range is constrained—unlike the discretion that has been available outside the range—and must continue to be based on an evaluation of the factors bearing on the international competitiveness of Fund salaries.” - “Moreover, no consideration has yet been given to whether or how such discretion would be exercised in determining the salary increase for this year; those decisions will be taken up by Executive Directors during the annual salary review in March.” - March 30, 2005: Following discovery of two errors in comparator data used in the 2004 compensation review, the Executive Board approved a supplementary increase in the Fund’s salary structure of two percentage points, with effect from May 1, 2004. - Effect of the correction: - The 2004 U.S.-indicated increase was placed within the testing range by the correction. - The retroactive adjustment placed the Fund’s 2004 salary structure two percentage points higher relative to the U.S. comparator, increasing the base for the 2005 market comparison and lowering the amount of increase indicated by the U.S. market for 2005. - Result: “the structural increase actually called for by the amended compensation system, as approved in the 2005 compensation round, did not differ from the increase that would have been called for under the system existing prior to its January 2005 amendment.” ### Channels of Administrative Review and Timeliness - Article VI, Section 2 of the Tribunal’s Statute provides that an application challenging the legality of a “regulatory decision” may be filed within three months of its announcement or effective date; there are no administrative review channels to exhaust for regulatory decisions challenged directly. - The contested Executive Board decision was announced to staff on January 25, 2005; Applicants filed Applications on April 25, 2005. ### Parties’ Principal Contentions — Merits and Admissibility Applicants’ contentions on the merits - The Executive Board’s January 24, 2005 decision fails to comply with the Fund’s “rules-based” compensation system and is contrary to the Fund’s internal law and established past practice, creating legitimate expectations for staff. - The decision is contrary to general principles of international administrative law and infringes Applicants’ terms and conditions of employment. - The decision is not based on objective analysis and fails to support international competitiveness of staff salaries as required by the Fund’s Articles of Agreement. - The decision is arbitrary and an abuse of discretion. Respondent’s contentions on admissibility - The January 24, 2005 decision, which allowed greater discretion for the subsequent structural salary adjustment for 2005, had no adverse financial consequences for Applicants in the 2005 compensation review. - Applicants have not shown any other adverse effect flowing from the decision; other alleged effects are abstract and hypothetical and conflate adverse effect with the merits. - Applicants have failed to establish any foreseeable and definite adverse effect resulting from the contested decision, as required for admissibility under the Statute. Applicants’ contentions on admissibility - Regulatory decisions differ from individual decisions with respect to “adverse effects”; widening discretionary powers affects the balance of interests between Management and staff and opens the door for more specific decisions affecting staff rights. - The Executive Board’s intention in amending the compensation system was to lower the amount of increase indicated by the U.S. market in 2005 to a level not permissible prior to January 2005; the absence of adverse financial consequences in 2005 resulted from discovery of data errors in the 2004 exercise. - The contested decision gives rise to foreseeable and definite adverse effects on Applicants’ individual legal situations because the widening of the Executive Board’s discretion affects terms and conditions of employment. ### Tribunal’s Consideration of Admissibility - The Tribunal’s jurisdiction covers review of “individual decisions” and “regulatory decisions”; applicants must demonstrate being “adversely affected” by the contested decision per Article II, Section 1(a). - Precedent: IMFAT Judgment No. 2002-3 (December 18, 2002) and the Commentary on the Tribunal’s Statute emphasize that an applicant must have an actual stake and that the Tribunal is not to resolve hypothetical questions or issue advisory opinions. - The Tribunal finds that the January 2005 Executive Board decision widening the range of discretion to set staff salaries permits Applicants to surmount the threshold of admissibility: - The decision was adopted and remains in force; it can be applied in 2006 to affect staff compensation unless the Executive Board decides otherwise. - An application may be summarily dismissed only “if it is clearly inadmissible” (Rule XII). - International administrative jurisprudence (e.g., Ayoub (No. 2), ILOAT Judgment No. 986 (1989); Aelvoet (No. 6) and others, ILOAT Judgment No. 1712 (1998)) supports receivability of challenges to regulatory decisions when a reasonable presumption exists that the decision will bring injury even if no present injury has occurred. - Conclusion on admissibility threshold: - The widening of the Fund’s discretion to adjust compensation is sufficient to establish a non-hypothetical stake for Applicants at the admissibility stage; the Applications are not clearly inadmissible on the ground asserted by Respondent. *Administrative Tribunal of the International Monetary Fund — JUDGMENT No. 2005-3* ### Section 2 ### j2005-3 - Section 2 ### Tribunal's assessment of "present effect" - The Tribunal finds that, in respect of the Applications before it, there is “some present effect.” - That effect arises from the wider discretion that the Executive Board has assumed in respect of salary adjustments which, in the absence of further action by the Executive Board, will be applied in 2006. - On that basis, the Tribunal concludes the Applications are not “clearly inadmissible,” and therefore denies the Fund’s Motion for Summary Dismissal of the Applications. ### Support from the Executive Board Report - The Tribunal cites the Report of the Executive Board on the Statute of the Tribunal, emphasizing the utility of affording staff the right directly to challenge regulatory decisions of the Fund. - Quoted material from the Report: - “Regulatory decisions could be challenged by adversely affected staff within three months of their announcement or effective date. It is considered useful to permit the direct review of regulatory decisions within this limited time period. As a result, the question of legality, and any related issues (such as interpretation or application) could hopefully be firmly resolved before there had been considerable reliance on, or implementation of, the contested decision.” (Report of the Executive Board, p. 25.) - The Report thus contemplates resolving legality of regulatory decisions “... before there has been considerable reliance on, or implementation of, the contested decision.” ### Procedural outcome and schedule - Because the Fund’s Motion for Summary Dismissal is denied, the exchange of pleadings pursuant to Rules VIII – X of the Tribunal’s Rules of Procedure will resume. - The filing of the Motion suspended the time for answering the Applications until the Motion was acted on by the Tribunal (Rule XII, para. 2.). - Following denial of the Motion, the procedural sequence will continue: the Fund’s Answer on the merits, Applicants’ Reply, and the Fund’s Rejoinder will follow according to the schedule prescribed by the Rules. ### Decision and signatures - FOR THESE REASONS - The Administrative Tribunal of the International Monetary Fund unanimously decides that: - The Fund’s Motion for Summary Dismissal is denied. - Signed by: - Stephen M. Schwebel, President - Nisuke Ando, Associate Judge - Michel Gentot, Associate Judge - Stephen M. Schwebel, President (signature line repeated) - Celia Goldman, Registrar - Decision location and date: - Washington, D.C. - December 6, 2005 --- _Source: https://www.imf.org/-/media/files/imfat/j2005-3.pdf_