## Elkjaer et al. (No. 3), Applicants v. International Monetary Fund, IMFAT Judgment No. 2023-5 (December 29, 2023)

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**Canonical URL:** [Elkjaer et al. (No. 3), Applicants v. International Monetary Fund, IMFAT Judgment No. 2023-5 (December 29, 2023)](https://www.imf.org/-/media/files/imfat/j2023-5-summary.pdf)

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### Background and claims
- Applicants: six staff members of the Fund, most of whom were principals or former principals of the Staff Association Committee (“SAC”).
- Challenged measures: Board decisions taken April 15, 2022, effective May 1, 2022, relating to the staff compensation system:
  - modification of the “safeguard mechanism” rule to specify use of end-January (rather than end-financial year) salary data for calculating the comparatio;
  - adoption of the FY2023 staff compensation decision based on the modified rule.
- Procedural basis: Applications brought pursuant to Article VI (2) of the Tribunal’s Statute (direct challenges to “regulatory decisions” concerning terms and conditions of staff employment).
- Prior related judgment: Elkjaer et al. (No. 2), IMFAT Judgment No. 2023-1 (January 30, 2023), addressed FY2022 compensation and use of end-financial year (April 30) data versus March 1 data.

### Standing (justiciability)
- Fund’s position: Applicants not “adversely affect[ed]” within meaning of Article II(1) because safeguard mechanism had been triggered using end-January data and the Board adjusted compensation upward.
- Tribunal’s holding on standing:
  - The “adversely affecte[ed]” requirement assures an applicant has an actual stake in the controversy (para. 62).
  - Distinct inquiries: admissibility (adversely affected) vs. merits (abuse of discretion).
  - Conclusion: “As staff members whose salaries have been affected by the FY2023 compensation decision, which was predicated on an allegedly unlawfully modified ‘safeguard mechanism’ rule, Applicants have an adequate stake in the controversy to press their claims.” (para. 66)

### Legal framework: “fundamental and essential” versus discretionary amendments
- Tribunal’s distinction:
  - “Fundamental and essential” conditions of employment are not subject to unilateral amendment.
  - Non-fundamental/non-essential conditions may be amended by the organization subject to lawful exercise of discretionary authority (reviewable for abuse of discretion).
- Recognized fundamental principles of the Fund’s compensation system:
  - that it is “rules-based”;
  - that it is “comparator-based.”
- Implementation of those principles (specific rules such as the safeguard mechanism) falls within the Fund’s discretionary authority and is reviewable for abuse of discretion.
- Applicants’ alternative arguments:
  - (a) the modification violated a “fundamental and essential” condition because the safeguard mechanism rule (from the 2019 Comprehensive Compensation and Benefits Review (“CCBR”)) was part of the rules-based system; or
  - (b) if discretionary, the Board abused that discretion in how it amended the rule.

### Merits — improper motive, reasonable relation, and consideration of relevant facts
- Stated purpose of 2022 amendment (quoted from Board Paper):
  - to balance “the objective of substantively reflecting internal labor dynamics during the year that impact the comparatio and hence the safeguards assessment, with the need to ensure that the annual budget and compensation reviews could be completed—including with sufficient time for consultations with stakeholders—before the end of each fiscal year.” (para. 77)
- Applicants’ contentions:
  - The balance was not contemplated by the safeguard mechanism and the modified rule partially accounted for annual salary erosion, producing an upward bias in the comparatio.
  - The Board was insufficiently informed of the quantitative effect of excluding a quarter-year of salary erosion on the comparatio.
  - The Board was misadvised by Management’s speculative comments in Responses to Technical Questions.
- Tribunal’s analysis and findings:
  - Improper motive:
    - The Tribunal found it was within Fund discretionary authority to add the objective of ensuring timely deliberation and consultation in the budget timetable (including Rule J-4 requirement that the annual budget be proposed by Management to the Board by April 1 each year) to the safeguard rule’s purposes (paras. 81–83).
    - Conclusion: modification was not improperly motivated.
  - Reasonable relation to objective:
    - Policy-making discretion permits choosing among reasonable alternatives; a rational nexus is required but not a perfect fit (paras. 86–87).
    - Cutting off data collection at January 31 has a rational nexus to the goal of meeting budget timetables and allowing deliberation/consultation; the January cutoff, while not a perfect fit, is reasonably related to the objective (para. 90).
    - Conclusion: the modification was reasonably related to its intended objective.
  - Consideration of relevant facts:
    - Given information before the Board (including SAC’s Statement containing knowledge of Management’s prior mistaken prediction), the Tribunal held the Board had relevant facts and did not abuse its discretion in reaching its decision (para. 97).

### Outcome
- Tribunal conclusions:
  - The safeguard mechanism rule (as modified in 2022 to use end-January data) is not a “fundamental and essential” condition of Fund staff employment; it is one method of implementing the rules-based and comparator-based system (paras. 72–74).
  - The 2022 modification to use end-January salary data was not improperly motivated, was reasonably related to its objective, and was based on an appropriate consideration of relevant facts.
  - The Board’s adoption of the FY2023 staff compensation decision based on the modified rule was sustained for the same reasons.
- Disposition: The Applications were denied.

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_Source: https://www.imf.org/-/media/files/imfat/j2023-5-summary.pdf_