## Elkjaer et al. v. International Monetary Fund, IMFAT Judgment No. 2021-4 (December 28, 2021)

## Source details

**Canonical URL:** [Elkjaer et al. v. International Monetary Fund, IMFAT Judgment No. 2021-4 (December 28, 2021)](https://www.imf.org/-/media/files/imfat/j2021-4-summary.pdf)

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### Case background and procedural context
- Applicants: four Fund staff members who also served as principals of the Staff Association Committee (SAC).
- Subject of challenge: Executive Board decision, effective May 1, 2020, to increase the FY2021 annual contribution rate for participants in the Medical Benefits Plan (MBP) by 3.6 percent, compared with a structural salary scale increase for the same year of 2.7 percent.
- Legal basis: Applications brought under Article VI(2) of the Tribunal’s Statute (direct challenge to “regulatory decisions” concerning terms and conditions of staff employment).
- Amicus participation: Representatives of the IMF Retirees Association (IMFRA) were permitted to communicate views to the Tribunal as Amicus Curiae under Rule XV of the Tribunal’s Rules of Procedure.
- Oral proceedings: First case in which the Tribunal held oral proceedings “open to all interested persons” (statutory references: Statute Article XII; Rules of Procedure Rule XIII), conducted “by electronic means” (Statute, Article XI).
  - Some 250 Fund staff and retirees viewed some or all of the virtual proceedings.
  - A recording was made available by request to the Registrar.
  - On an exceptional basis, parties’ written submissions were made accessible to Fund staff and retirees.

### Legal issues considered
- Whether a Fund rule existed, established by “formal commitment” or “longstanding practice,” that MBP contribution rate increases may not exceed the structural salary adjustment for a given year.
- Whether maintaining a “rules-based” compensation system is a “fundamental and essential” condition of employment that insulated MBP contribution rates from unilateral amendment.
- Whether the Fund abused its discretion in setting the FY2021 MBP contribution rate, including failure to base the decision on appropriate consideration of relevant facts or exploration of alternatives.
- Whether the decision was taken in accordance with fair and reasonable procedures, including meaningful consultation with key stakeholders (SAC and IMFRA).

### Tribunal findings on existence of a binding rule or practice
- 2008 Board decision:
  - Tribunal conclusion: The 2008 Board decision did not establish a rule capping MBP contribution rate increases by the structural salary adjustment.
  - Rationale: The 2008 decision was a limited delegation to the Managing Director to increase MBP contribution rates annually; nothing in the 2008 decision showed an intention to constrain the Executive Board’s authority to determine contribution rate increases independently of the percentage structural adjustment.
  - The underlying Board Paper stated that annual adjustments to the MBP contribution rate would be pre-announced “in line with the structural salary increase ‘at a minimum,’” indicating a floor rather than a ceiling.
- “Longstanding practice” argument:
  - Tribunal observation: Although in most years between 2008 and 2020 MBP contribution rate increases matched annual structural salary adjustments, there was no evidence the Fund regarded itself as legally obliged to limit increases in that way.
  - Jurisprudential standard cited: integration of practice into conditions of employment requires evidence that the organization follows the practice in the conviction that it reflects a legal obligation (Para. 93).

### Tribunal analysis of “rules-based” compensation and discretionary authority
- Scope of “rules-based” system:
  - Tribunal note: The Fund’s commitment to a “rules-based” compensation system focuses primarily on salary structure determination and allows “‘some scope for management and the Executive Board to exercise judgment within defined parameters, in setting salary levels.’” (Para. 101)
  - For purposes of the Judgment, the Tribunal accepted that a “rules-based” compensation scheme applied to other employment benefits, including the MBP.
- MBP Plan terms:
  - The Plan, by its terms, permitted the Fund as employer to vary contribution rates.
  - Tribunal: Provision for discretion within a system does not invalidate the system (Para. 103).
  - Discretion is regulated by constraints against abuse; the existence of discretion did not render the Plan non-“rules-based” nor did it mean the contested decision contravened the Fund’s obligation to maintain a “rules-based” compensation system as a “fundamental and essential” condition of employment.

### Tribunal review of abuse of discretion and reasonableness of the decision
- Evidence basis:
  - Tribunal review of the record found the decision was taken on the basis of the relevant facts available to the Fund at the time, including actuarial reports concerning the financial experience and projections for the Plan.
- Impact assessment:
  - Tribunal observations:
    - The impact of the FY2021 MBP contribution rate increase on staff members was not substantial.
    - Alternatives identified by Applicants might have had far more substantial impacts (for example, by reducing the MBP benefit structure).
  - Conclusion: The Board’s decision was a reasonable choice among more than one reasonable alternative; Tribunal jurisprudence recognizes Fund policy-making discretion to choose between reasonable alternatives.

### Tribunal assessment of consultation and procedural fairness
- Consultation provided:
  - Fund provided SAC and IMFRA an opportunity, albeit with a short turnaround time, to comment on the proposed MBP contribution rate approach; SAC raised concerns in that exchange.
- Management’s Board Paper (EBAP/20/32):
  - Did not indicate SAC’s objections to the proposed policy change.
  - Tribunal statement: “It would have been good practice for Management to have informed the Executive Board that the SAC (and IMFRA) had been consulted on the proposals in the Board Paper and had raised concerns.” (Para. 127)
- Responsibility for communicating concerns:
  - Tribunal conclusion: The fact Management did not inform the Board did not bar SAC and IMFRA from informing the Executive Board themselves; given they could have approached the Board but failed to do so, the Tribunal could not conclude the Fund failed to act in accordance with fair procedures when it did not draw their concerns to the Board’s attention. “Responsibility for meaningful consultation rests with both sides.” (Para. 127)
- Final procedural assessment:
  - On balance, the Tribunal held that although consultation might have been more extensive, Applicants did not establish that the Fund’s conduct regarding consultations represented an abuse of discretion. (Para. 128)
  - Tribunal concern: Neither Management nor the SAC brought their disagreement to the Board’s attention; Tribunal noted that Board decision-making relating to staff employment, compensation and benefits will benefit from being fully informed of the views of all key stakeholders.

### Outcome
- Tribunal conclusion: The Fund did not violate a “fundamental and essential” condition of Applicants’ employment, nor did it abuse the discretionary authority available to it in setting the FY2021 MBP contribution rate.
- Disposition: The Applications were denied.

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_Source: https://www.imf.org/-/media/files/imfat/j2021-4-summary.pdf_