C-8/57

7. Influence on investments — Financial arrangements — Indirect action regarding investments

The provisions of Article 54 in no way impede the adoption of measures in accordance with the provisions of Articles 3, 5, 53 (b), 57 and 59 of the Treaty, taken together, the application of which may influence investments planned by undertakings. In particular the financial ar­ rangements referred to in Article 53 (b), which the High Authority is entitled to use as an in­ direct means of action on production, entail by their nature results capable of affecting the plans of undertakings, such as, for example, their investment plans (Treaty, Articles 53 (b) and 54).

In Case 8/57

GROUPEMENT DES HAUTS FOURNEAUX ET ACIÉRIES BELGES, a non-profit-making association governed by Belgian law, having its head office in Brussels, repre­ sented by its Chairman, Pierre Van der Rest and Baron Donald Fallon, Director of its economic and social division, assisted by Marcel Grégoire, Advocate at the Cour d'Appel, Brussels, and J. Mertens de Wilmars, of the Antwerp Bar, with an address for service in Luxembourg at the Belgian Embassy, 9 boulevard du Prince- Henri, applicant,

ACIÉRIES BELGES v HIGH AUTHORITY

v

JUDGMENT

Issues of fact

1. Facts reference period in the past. In order to take account of all individual situations each un­ Since March 1956 the applicant has submit­ dertaking is permitted to choose its refer­ ted observations and suggested amend­ ence period (six months from seven consec­ ments with regard to the various proposals utive months between 1 January 1953 and of the defendant concerning a re-organiza­ 31 January 1957). tion of the market in ferrous scrap; never­ Article 8 of the decision provides a guaran­ theless it did not agree with any of those tee for undertakings that the increase in the proposals which gave rise to Decision No contribution shall be slowly progressive 2/57 of 26 January 1957. whilst Article 9 permits undertakings In Decision No 2/57 which, inter alia, ex­ which have reduced the specific input of tends the application of Decisions No 26/55 their plant or their production processes, to and No 3/56, the same arrangement pro­ reduce or even completely to eliminate vides for the equalization of the prices of their contributions at the supplementary imported ferrous scrap and domestic scrap rate.

and the effecting of economies in scrap. It The applicant states that Decision No 2/57 requires, in addition to contributions at the discourages not only the increase in the per­ basic rate, contributions at a supplementary centage of the specific input but also the ab­ rate imposed in terms of the proposition of solute increase in the consumption of fer­ scrap consumed in existing plant in excess rous scrap. This system gives a new direc­ of the amount of scrap consumed during a tion to the arrangements for the equaliza­

tion of ferrous scrap and does not really re The defendant maintains that it is clear present a saving of ferrous scrap; instead it from the judgments of the Court of Justice crystallizes the previous situation for the in Cases 3 and 4/54 that for an application benefit of undertakings which have wasted by an association of undertakings to be ad ferrous scrap and penalizes undertakings missible it is sufficient that certain under which have economized in it and new un takings are affected by the relevant decision dertakings which do not have the advan although other undertakings are not.

omy. Those objectives could not have been 2. Whether the submissions constitute attained merely by a general increase in the complaints of misuse of powers price of scrap. The defendant maintains that, if the classic 2. Conclusions of the parties distinction between the concept of motive and that of object is applied to the four sub The applicant claims that the Court should: missions in the application, they may be classified as follows. 'Annual the provisions contained in Arti cles 3(1) (b), 6, 8 and 9.

3. Submissions and arguments of tion. the parties (b) Three complaints of infringement of A — The admissibility of the application the Treaty: infringement of Articles 53 and 54 (the 1. Whether it is possible for a misuse of scope of the powers conferred by Article powers to have been committed affect 53 with reference to Article 54); ing the applicant association itself infringement of Articles 53 and 59

(scope of the powers conferred upon the may only be pursued through the procedure High Authority with reference to Arti under Article 59. To state, as the decision cle 59); and does, that persons are entitled to a fixed infringement of Articles 3 (b) and 4 (b). quantity of material at a moderate price and that any additional material will be subject The applicant maintains the form of its sub to a double levy constitutes distribution or missions and states that the conditions for allocation. the admissibility of its action have been ful The High Authority's objective is to pre filled: vent any consumption of ferrous srap ex ceeding the reference consumption.

shortage. ferred upon it. Nevertheless this concept The reason why the High Authority did not must be preserved intact and must not employ Article 59 was that it wished to gravitate under the influence of French avoid the formalities which are prescribed case-law towards the concept of infringe and which it considered more burdensome ment of the law, to the point of being ab than the formalities in Article 53 since they sorbed by it. contain guarantees for the undertakings It is impossible further to restrict in this way concerned. the access of undertakings to the Court con The defendant denies that it used the pow trary to what was intended in the Treaty. ers which it posseses under Article 53 for All legal procedures may be employed to the purpose of allocating ferrous scrap.

JUDGMENT OF 21. 6. 1958 — CASE 8/57

ticle 3. tem of equalization of imported ferrous The defendant denies that it endeavoured, scrap. by encouraging undertakings to effect With regard to misuse of procedure the ap economies in ferrous scrap, to hinder the plicant is not justified in maintaining that development of steel production. the High Authority had recourse to the Article 3 lays down for the institutions of procedure under Article 53 in order to avoid the Community objectives which must be making a study jointly with the undertak pursued in the common interest.

implementation. tion'. The concept of allocation would have Furthermore Article 3 of the Treaty in no to be improperly extended if it were to en way prohibits the High Authority from un compass financial arrangements. dertaking a long-term action; it does not limit its action to taking into consideration Second complaint: Misuse of powers in con the immediate facts of the market situation. nexion with Article 53 (b) and Articles 2, 3, Finally the applicant has by no means 4 and 5 of the Treaty: the objectives pur proved that the measures to encourage sued by the High Authority by means of the economies in ferrous scrap were not in financial arrangements under Article 53 are tended to maintain opportunities for expan contrary to the objectives defined by Arti sion, which is the objective of Article 3 (d) cles 3 and 4 of the Treaty. and (g) in accordance with the indication The applicant maintains that the objectives which may be inferred from the general ob of the contested decisions which would jectives laid down by the High Authority. normally be anticipated are: With regard to Articles 3 (b) and 4 (b), viewed in relation to infringement of the The establishment of a system of double Treaty, the defendant replies that the appli prices fixed in terms of a reference period cant is mistaken in maintaining that discri with possible refunds in accordance with mination is constituted by the fact that the certain criteria; general measure has effects which vary in The creation of unequal access to the accordance with the actual situation of the sources of raw materials, in particular for persons concerned.

Third complaint: Misuse of powers in re tion of discrimination between producers). spect of Article 53 (b) and Articles 2, 3, 4,

5, 46 and 54 of the Treaty: the High Author thority has exercised the powers conferred ity may not have recourse to the financial upon it by Article 53. arrangements under Article 53 for the pur pose of prohibiting certain new installations Fourth complaint: Contradiction between or of encouraging certain investments, the various objectives stated in Decision No whilst disregarding the requirements of Ar 2/57 on the one hand and the objectives ticle 54. stated and the objectives actually pursued

ant. The defendant may not exceed those since the High Authority is aware that there limits, even through the expedient of Arti are steel-works which cannot effect econo cle 57; it may not do through indirect action mies in ferrous scrap and others which, in what is prohibited through direct action. order to do so, would have to alter basically Since the defendant is aware (Cf. the pre their manufacturing methods. Moreover amble to Decision No 3/56) that in certain there is a contradiction between the objec manufacturing processes, such as basic tives stated and the objectives actually pur Bessemer converters and solid-charged sued. By obliging undertakings to effect electric furnaces, it is impossible to effect economies in ferrous scrap of which they economies in ferrous scrap, it is directly are technically incapable and by penalizing influencing investments and penalizing ad them if they fail to do so the High Author ditional consumption of ferrous scrap. ity, contrary to the objective stated in the preamble to Decision No 2/57 is preventing The applicant in addition charges the High them from increasing their production or Authority with having desired to prohibit taxing them in terms of the selling price of certain investments and to regulate others their products which has nothing to do with without having regard to individual consul effecting economies in ferrous scrap. tations and to the specific studies required under Article 54 and, consequently, in or The defendant replies that this complaint der to avoid recourse to the formalities pro does not constitute a submission of powers vided for therein which it considered more because it merely refers to the effects of the

With regard to the misuse of procedure this The instruments appointing the agents and complaint is unacceptable. With regard to lawyers of the parties are in order. investments Article 54 is not exhaustive The written procedure followed the normal and Article 53 makes it possible to adopt course. The statements of the parties, with measures which must be expected to affect their related annexes, were lodged within investments. Accordingly there are no the prescribed periods and were duly grounds for complaining that the High Au­ served.

JUDGMENT OF 21. 6. 1958 — CASE 8/57

Law

A — Admissibility

Consequently the application is admissible.

B — Substance

The High Authority has selected Article 53 as the legal basis of the scheme for the equalization of ferrous scrap which it has established. That article permits it to intervene in connexion with the tasks assigned to it under the Treaty, in particular under Article 3 thereof. Article 53 appears in Chapter II, entitled 'Financial Provisions', the other articles of which relate to the use of funds which the High Authority obtains through lev­ ies on production or by loans. It may accordingly be considered that the financial arrangements referred to in Article 53 are arrangements based on the transfer of resources, in particular arrangements in the nature of equalization or compensa­ tion. This interpretation is confirmed by the last paragraph of Article 62 which provides that certain equalization payments 'may ... be instituted as provided in Article 53'. The equalization arrangements do not directly affect prices but rather the factors contributing to the formation of prices. In this way those factors, without preven­ ting prices from being freely fixed, modify the level at which they are fixed. The financial arrangements provided for in Aticle 53 affect by such alterations in the

ACIÉRIES BELGES v HIGH AUTHORITY

These provisions can stand by themselves and accordingly, in so far as they have not been adopted in any other provision of the Treaty, they are directly applicable. If they have been adopted or are governed by other provisions of the Treaty words relating to the same provision must be considered as a whole and applied together. In practice it will always be necessary to reconcile to a certain degree the various objectives of Article 3 since it is clearly impossible to attain them all fully and simultaneously as those objectives constitute general principles which must be observed and har monized as far as possible; on the other hand such financial arrangements must be instituted without infringing the provisions of Article 58 and of Chapter 5 of Title III of the Treaty. Decisions prior to Decision No 2/57 were concerned to equalize the prices of im ported ferrous crap and domestic scrap. Decision No 2/57 continues this system but adjusts it and supplements it with new provisions intended to affect at the same time the price of ferrous scrap and the total volume of purchases in order to encourage undertakings to effect economies in ferrous scrap in the interests of a regular supply to the market. If the demand had over an extended period exceeded the supply of scrap it could have led to a 'serious shortage' for which the procedures laid down in Article 59

JUDGMENT OF 21. 6. 1958 — CASE 8/57

incompatible with one or more of those basic provisions and that this finding renders unnecessary any consideration of the actual objectives of those measures although such consideration is required in connexion with a complaint of misuse of powers in relation to all the other provisions of the Treaty. In fact the second paragraph of Article 33 of the Treaty only entitles undertakings to institute proceedings against general decisions of the High Authority if the un­ dertakings consider that such decisions involve a misuse of powers affecting them. This is plainly a restrictive provision requiring a consideration of whether there has in fact been a misuse of powers and this in essence entails a review of the aim pursued and, indeed, consideration of the objectives of the contested measure since no provision of the Treaty justifies a derogation in this respect in proving misuse of powers.

1. The complaint of misuse of powers with regard to Article 53 (b) and Articles 2, 3, 4 and 5 of the Treaty, that is to say that the objectives pursued by the High Authority by means offinancial arrangements under Article 53 are contrary to the objectives defined by Articles 3 and 4 of the Treaty.

ACIÉRIES BELGES v HIGH AUTHORITY

(b) The purpose of the provisions contested in the present application was to make the contribution for the equalization of the prices of imported ferrous scrap progressively selective by increasing the rate applicable to the consumption of bought scrap above a given reference level and by graduating the charges thereby imposed in terms of a specific input coefficient for ferrous scrap in the installations

JUDGMENT OF 21 6. 1958 — CASE 8/57

and the manufacturing processes requiring scrap. Furthermore the said provisions contain a set of transitional measures intended to permit undertakings to adopt themselves progressively to the conditions there­ by created for them, in particular the choice by each undertaking of its own ref­ erence period, the period of six months during which payment of the contribution at the supplementary rate is suspended the graduated nature of the rate, the al­ location of a reference consumption and a specific input reference for plant which began operations during the year following the entry into force of the decision to­ gether with the allocation of a specific input reference without a time-limit for all plant beginning operations after the expiry of this latter period. Through those measures the High Authority provided the scheme for the equalization of the prices of imported ferrous scrap, which it had previously established, with condi­ tions intended to prevent a fall in the price of ferrous scrap resulting from equal­ ization from encouraging producers in the Common Market to increase their con­ sumption of scrap. Thus defined the decisive aim of the contested provisions constitutes lawful in­ direct action, within the meaning of Article 57, applied to the market in ferrous scrap in order to ensure, bearing in mind the facts and circumstances then ob­ served, regular supplies to the Common Market. The said aims are thus in accordance with the provisions of Article 3 (a) and the latter part of (d), the second paragraph of Article 2 and the third subparagraph of the second paragraph of Article 5 of the Treaty.

ACIÉRIES BELGES v HIGH AUTHORITY

when this is clearly the result of the indifferent operating conditions. The supplementary rate established under Article 3 (1) (b) of the contested deci­ sion applies generally and entirely to any consumption of bought scrap in excess of that relating to a reference period. The discretion conferred upon the undertak­ ings subject to the scheme themselves to select, within specially prescribed tem­ poral limits, the period most favourable to them does not, however, mean that the criterion used for distinguishing between them thus loses its objective nature, without which it would appear arbitrary. Indeed the factual differences which this situation entails for undertakings stem from their dissimilar operating conditions and not from any legal inequality inherent in the decision. The graduation of the contested supplementary rate laid down by the provisions of Article 8 is based exclusively on the successive periods for the application of Decision No 2/57. The graduation is thus general and absolute, objectively based upon the wish progressively to provide encouragement, by influencing prices, to steel undertakings consuming ferrous scrap to economize in using it so as to avoid its unconsidered exhaustion. The refunds of the proportion of the equalization contribution calculated at the supplementary rate, which were established pursuant to Article 9 of the disputed decision, are granted on a purely objective basis, the reduction of the specific input coefficient of ferrous scrap for each type of plant and manufacturing process using that material. The varying effects which the application of that article produces on the persons concerned, by reason of varying operating conditions and technical problems which, for certain categories of plant, may reduce or even exclude en­ titlement for refunds cannot render the rule inequitable in law—which is excluded by the nature of the criterion adopted.

(e) Furthermore the objectives laid down in Article 3 of the Treaty must be ap­ praised as a whole and pursued exclusively in the common interest. The concept of the common interest referred to in Article 3, far from being restricted to the sum of the individual interests of coal and steel undertakings subject to the jurisdiction of the Community, considerably exceeds the scope of such interests and is defined in relation to the general aims clearly laid down in Article 2. Consequently pursuit of the objectives prescribed in Article 3 does not rule out selective measures based in particular upon the nature of the means of production to be developed or created if it appears that economic circumstances and the rea­ sonably foreseeeable trend of market conditions call for such measures. This is certainly so when there are dangers of a serious shortage of one of the basic raw materials for the steel industry or if it appears necessary to adopt a policy of using resources rationally in order to avoid their unconsidered exhaustion. The distinc­ tions which may consequently prove necessary to maintain conditions which will encourage undertakings to expand and improve their production potential and to promote its regular development nevertheless must be based upon purely objec­ tive criteria in accordance with their principle of equality laid down in the Treaty. The provisions of Article 6 of the contested decision are intended progressively to encourage steel undertakings to use scrap as rationally as possible. To attain this the provisions alter the cost of financing the equalization of the prices of imported ferrous scrap both in terms of the nature of the plant and manufacturing processes and the date when operations were commenced, through the combined action of reference consumption and refunds granted in respect of relative economies in scrap. The graduated increase in the cost of ferrous scrap and the selective influ­ ence thereof on.the cost price of steel products vary in terms of objectively deter­ mined quantitative and qualitative criteria. Consequently the contested measures constitute with regard to the principle of non-discrimination provisions encourag­ ing undertakings to develop new capacities considered compatible with regular supplies of scrap for the steel industry and the orderly expansion of production. The provisions of Articles 6 and 8 of the contested decision thus constitute a body of progressive rules without which the financial arrangement established by the said decision would forfeit its character of an indirect means of action in relation to production thereby rendering it unlawful with respect to the provisions of Articles 5 and 57.

The indirect means of action are identical in their effects and in the power of in­ tervention which they confer but make it possible for all those participating in the market to retain their freedom of decision whilst direct influence requires the li­ mitation, if not the abolition, of such freedom. All the provisions of Article 6 of Decision No 2/57 are intended to make it possible for established situations to continue and to avoid the immediate and harsh resort to measures for the allocation of resources provided for in Article 59, in preference to which Article 57 prescribes indirect means of action. The provisions in parti­ cular with regard to 'reference consumption of bought scrap', 'specific input ref­ erences', the period of exemption from contributions at the supplementary rate and the graduated nature of that rate are steps in accordance with the wish to re­ spect that preference. With regard to 'new plant' it is true that, subject to the refunds for which it may qualify inasmuch as Article 6, at the end, grants a 'notional specific input refer­ ence', the price of ferrous scrap with which they are charged will in principle be higher. The same is true of 'solid-charged electric furnaces' in respect of which it can scarcely be anticipated that technical developments will bring about a notable reduction in their specific input of ferrous scrap. Nevertheless those findings do not affect the lawfulness of the system. In fact the lack of supplies and the increase in the price of ferrous scrap required the High Authority at one and the same time to encourage undertakings to reduce their consumption of ferrous scrap and to prevent the price of Community scrap from being fixed at the level of that of imported scrap. It was thus necessary to provide the equalization scheme with a supplementary contribution to counter the incen­ tive to increased consumption of ferrous scrap which might have resulted from

The objectives stated in the decision, certain of which are contested by the appli­ cant, are the ensuring of a regular supply of ferrous scrap to the Common Market and encouragement to steel undertakings consuming ferrous scrap to economize in it without thereby making it more difficult to raise output capacity for steel, through exerting an appropriate influence on the development of their production potential. It is clear from the oral procedure that the expansion of the steel industry in the Community would have been compromised if the maintenance of scrap prices through equalization at a lower level than that which, having regard to the need for imports, the effects of supply and demand would have led to, had encouraged the creation of new plant consuming ferrous scrap, the requirements of which could not have been met, or could only have been met at prices which would have been unacceptable having regard to the requirements of Article 3 of the Treaty. Far from contradicting each other the objectives thus pursued achieve in the com­ mon interest the reconciliation of objectives which the High Authority is required to attain under Article 53 of the Treaty since, without hindering the expansion of production, they encourage producers to bring it about through plant using pig- iron rather than ferrous scrap, which would have imposed upon consumers of scrap in general, through equalization, increases in charges capable of seriously jeopardizing the objectives listed in Article 3. Consideration of the contested provisions in the context of the scheme for the equalization of the prices of imported ferrous scrap to which they relate does not indicate a contradiction between the various objectives stated in Decision No 2/57

The financial arrangement in the contested provisions does not constitute, with regard either to its form or to its effects, the system of allocation described in Ar­ ticle 59 and in Annex II. In certain economic circumstances and subject to certain procedures, those measures authorize the allocation in tonnages of raw material resources to the various categories of possible consumers. The producers thus pro­ vided for consist exclusively in establishing consumption priorities and allocating resources. Such activities are directly and solely of a quantitative nature and are thereby distinct for all indirect action on production by means of prices without restriction of the volume of purchases. Article 58 itself, upon which the applicant relies, concerns the establishment of a system of production quotas or the regu­ lation of the level of activity of undertakings by appropriate levies on tonnages ex­ ceeding a reference level set by a general decision. It is further necessary to note the difference between the measures prescribed in cases of manifest crisis (Article 58) where the dominant idea concerns direct levies on tonnages, and the measures prescribed in cases of serious shortage (Article 59), where the concept of direct allocation of available resources predominates. Accordingly the financial arrangement contained in the contested provisions does not constitute a system of allocation which may be treated as equivalent in its ess­ ential characteristics to the arrangement under Article 59 and Annex II. The establishment of the supplementary contribution and the refusal of a refer­ ence consumption for plant and manufacturing processes put into operation after 31 January 1958 do not have such compelling force that they amount in practice to a system of allocation. They rather constitute means of intervention inherent in the financial arrangement itself which necessarily, by its very nature, affects the field of competition and production. None of the arguments put forward consti­ tutes sufficient proof in law that in this respect the system may be treated as equiv­ alent to the allocation for which provision is made in Article 59 and Annex II. In the contested measures the High Authority was concerned to deal with a situ­ ation market by extreme scarcity of ferrous scrap; in applying for this purpose the powers conferred upon it under Article 53 (b) of the Treaty it was acting in accor­ dance with the provisions of Article 59 which provide that recourse shall only be had to the special procedure of quantitative allocation, even if a case of serious shortage has been duly found, if the means of action provided for in Article 57, amongst which the financial arrangements referred to in Article 53 must be clas-

Article 54 of the Treaty confers upon the High Authority certain powers in coor­ dinating investment programmes and in providing financial assistance in carrying out these programmes. Those powers must be exercised within the framework of the general objectives laid down in Article 46. Within such limits the powers are applied by the publication of programmes of general guidance in accordance with the common interest and by formulating individual opinions on the plans submit­ ted to it by the undertakings. The abovementioned provisions in no way impede the adoption of measures in accordance with the provisions of Articles 3, 5, 53 (b), 57 and 59 of the Treaty, taken together, the application of which may influence investments planned by undertakings. In particular the rules concerning prices laid down in Article 61 of the Treaty and, above all, the Financial arrangements referred to in Article 53 (b), which the High Authority is entitled to use as an indirect means of action on pro­ duction, entail by their nature results capable of affecting the plans of producers, and in particular their investment plans. It is consequently impossible to complain that the contested provisions, which are in accordance with the provisions of Articles 3 and 53 (b) read together, are vitiated by misuse of powers with regard

ACIÉRIES BELGES v HIGH AUTHORITY

to Article 54. The applicant has completely failed to establish that the High Authority's sole, or at any rate principal, purpose in having recourse to the con­ tested provisions was to evade the specific procedures prescribed in the said article. Consequently the complaint of misuse of powers with regard to Article 54 must be dismissed.

Pilotti van Kleffens Delvaux

Serrarens Riese Rueff Hammes

Delivered in open court in Luxembourg on 21 June 1958.

M. Pilotti L. Delvaux

President Judge-Rapporteur A. Van Houtte

Registrar