C-10/57

JUDGMENT OF THE COURT 26 JUNE 19581

Société des Anciens Établissements Aubert et Duval v High Authority of the European Coal and Steel Community

Case 10/57

Summary

1. Procedure — Application for annulment — General decision — Undertaking as applicant — Misuse of powers — Admissibility

Proceedings instituted by an undertaking against a general decision are admissible if it main­ tains that it has been adversely affected by the contested provisions and if it formally alleges that on one or more occasions a misuse of powers affecting it has been committed, if it pro­ duces a relevant statement of the reasons leading it to believe that there has been a misuse of powers on one or more occasions and if the purpose of the arguments upon which it relies is to obtain a declaration that, when the High Authority adopted the contested provisions, it exercised the powers conferred upon it by the Treaty for purposes other than those for which they were conferred upon it. (Treaty, second paragraph of Article 33)

In Case 10/57

Société des Anciens Établissements Aubert et Duval , present proprietor A. R. J. Duval, a Société en Nom Collectif governed by French law, having its re­ gistered office in Neuilly-sur-Seine, represented by Robert Duval, one of its mem-

1 — Language of the Case: French.

JUDGMENT OF 26. 6. 1958

bers, assisted by Georges Chauvel, Advocate at the Cour d'Appel, Paris, with an address for service in Luxembourg at the offices of the Chambre Syndicate de la Siderurgie Française, 49 boulevard Joseph-II, applicant,

V

gives the following

JUDGMENT

Issues of fact

1. Facts cant instituted proceedings before the Court for its annulment. As soon as the applicant undertaking In Decision No 2/57 which, inter alia, ex­ learned of the draft of the future Decision tends the application of Decisions No 26/55 No 2/57 of the High Authority, it sent a let­ and No 3/56, the same arrangement pro­ ter on 26 January 1957 to the President of vides for the equalization of the prices of the High Authority drawing his attention to imported ferrous scrap and domestic scrap the serious consequences which the provi­ and the effecting of economies in scrap. It sions of the draft decision would have and requires, in addition to contributions at the which, according to the undertaking, were basic rate, contributions at a supplementary contrary to the spirit of the Treaty. rate imposed in terms of the proportion of Decision No 2/57 was published on 28 Jan­ scrap consumed in existing plant in excess uary 1957 and on 12 March 1957 the appl-i­ of the amount of scrap consumed during a

AUBERT ET DUVAL v HIGH AUTHORITY ECSC

The applicant states that it operates a steel­ The applicant claims that the Court should: works at Ancizes (Puy-de-Dôme) set up in 1917, which has abundant supplies of elec­ 'Annul Articles 6 (3), 8 and 9 of Decision tric energy and water power and which em­ No 2/57 of 26 January 1957 and, conse­ ploys two thousand workers. The only pos­ quently, Articles 3 (1) (b), 4 (3), 5,6 (1) and sible manufacturing process is by electric (2) and 7 thereof; furnace. Its production consists exclusively of high-quality alloy steel. This works can Order the High Authority to bear the costs. only use ferrous scrap, not liquid or solid pig-iron, as raw material. Any increase in The defendant contends that the Court the production of steel entails a parallel in­ should: crease in bought scrap and is consequently subjected to the supplementary rate with­ 'Dismiss the proceedings instituted against out entitlement to refunds. All technical Decision No 2/57 in that it does not involve progress reduces its own arisings and in­ misuse of powers affecting the applicant, creases its consumption of scrap. In the with all the consequences thereof in law, in very near future the applicant intends to re- particular with regard to the settlement of place an old furnace: the new, more techni­ fees, costs and any other expenses. cally advanced furnace will produce more and will either have no reference or will be 3. Submissions and arguments of penalized as a result of the increase in the the parties consumption of ferrous scrap. No other so­ lution to this situation is conceivable. A — Admissibility In order to escape the penalties the appli­ cant would require to freeze its production The defendant states that, in accordance at the level of the reference period and to with the case-law of the Court, for under­ fail to respond to the increasing demand takings to allege misuse of powers such from the market. This reduction in its bu­ misuse must be directed against them or siness would involve serious social conse­ they must at least be adversely affected by quences since two thousand persons are it. In the present case the misuse of powers concerned and the undertaking is situated was not directed against the applicant since in the heart of the country. Decision No 2/57 is a general decision The defendant replies that, since the shor­ adopted in the common interest of all the tage on the market in ferrous scrap was undertakings in the Community and the brought about by the ever-increasing con­ applicant does not allege that, when the sumption of scrap, it appeared appropriate High Authority adopted this decision, in­ to require increased payment from under­ stead of pursuing an objective in the general takings causing increased stress on the mar­ interest, it really pursued a particular objec­ ket. This general decision may indeed affect tive of its own. Since the applicant com-

plains of the different effect of the applica double prices which those provisions esta tion of the general rules in Decision No 2/57 blish of necessity results in allocation, dis depending on whether or not it is possible to crimination between undertakings, the effect economies in the use of scrap, it may creation of a privileged class of undertak to this extent be adversely affected by the ings enjoying priority, those which are tech provisions which it claims are illegal. nically capable of effecting economies in The defendant then considers whether the the use of scrap, and a class of selected vic five submissions put forward in the applica tims which are bound to be penalized.

First of all, thority pursued a specific objective of its the procedure under Article 53 is more dif own instead of an objective in the general ficult to implement since it requires the interest. The real objective of Decision No unanimous assent of the Council of Minis 2/57 is in fact to make a financial arrange ters. Further, Article 53 constitutes a means ment the objective of which is to finance, of indirect action on production, which the through undertakings selected as victims, a High Authority is bound to adopt, pursuant reduction in the price of ferrous scrap for to Article 57, even in cases of serious shor the benefit of steel-works whose technical tage. conditions permit them to benefit from the bonuses in Article 9 of the decision. Second complaint: Misuse of powers with Furthermore, the applicant claims that all regard to Article 3 (b) of the Treaty, because the submissions which it advances relate to Articles 8 and 9 of the contested decision do failure to observe the objectives of Article 3 not differentiate between consumers in the which, in accordance with Article 53, the Common Market who are not comparably High Authority is bound to pursue. placed. The applicant states that, like all undertak B — Substance ings using electric furnaces, it is not com parably placed, with regard to the need to First complaint: The establishment of a sys use ferrous scrap, with undertakings which tem of priorities and of allocation, consti are technically capable of using other raw tuting misuse of powers with regard to Ar materials and of effecting economies in fer ticles 53 (b), 59 and Annex II. rous scrap. The contested provisions place The applicant maintains that the principal certain undertakings, whose position is not and specific aim of the contested provisions comparable to the privileged undertakings, is to allocate ferrous scrap. The scheme of in a situation in which they no longer have

equal access to the sources of production. their legal objective, which is to carry out This accordingly constitutes a contradic the tasks with which it is charged under Ar tion between the objectives actually pur ticle 3 of the Treaty. sued and the objectives which the High Au The defendant replies that the applicant thority is bound to observe in employing complains that it has exceeded the powers Article 53, in particular the objectives spec which it possesses under Article 53 and has ified in Article 3 (b). disregarded the exclusive nature of the pro The defendant replies that the complaint of visions of Article 54 with regard to mea indiscriminate treatment of consumers in sures concerning investments.

dition of maintaining equal access to the sources of production. The objectives of Ar Fourth complaint: Misuse of powers in rela ticle 3 must be reconciled in accordance tion to Article 3 (d) and (g), in that the High with the circumstances obtaining at the Authority is pursuing objectives the effect time. In the present case pursuit of the ob of which is to prevent the improvement of jective of regular supplies is necessary for production and technical progress. the attainment of all the other objectives. The applicant states that the application of Furthermore, the applicant fails to take into the reference period indicates deliberate in consideration other factors relating to non- tention to discriminate against manufactur comparability which are contrary to its ar ers of special steel expressed by penalizing,

The much less. powers conferred upon the High Authority do not permit it in the present case to im Third complaint: Misuse of powers in that pose, under the guise of alleged common through discriminatory measures the High interests, arbitrarily appraised, what Authority penalizes the expansion of cer amounts to taxation upon a certain number tain undertakings and confers upon itself of undertakings in the Community. wide powers concerning the control of in The defendant replies that the complaint vestments. against it, that it intended deliberately to The applicant states that if it wished to qual prevent the development of production, in ify for the refunds (Article 9) or avoid the fact constitutes a complaint of infringement penalties (Article 8) it would be necessary to of Article 3 (d) and (g). However the objec

JUDGMENT OF 26. 6. 1958

The Provisions, concerning the continuity of High Authority has thus disguised as a gen employment of workers and the improve eral decision a decision whose sole logical ment of working conditions and the stand and comprehensible objective is to penalize ard of living. a certain category of undertakings in the The applicant states that it could only bene Community. fit from the compensatory bonus provided The defendant replies that the applicant's for in Article 9 of Decision No 2/57 by allegation in fact constitutes a complaint of transferring part of its operations to an area misuse of powers.

fected. The prevention of expansion of the missions put forward, in the light of the pro undertaking through the effects of the pro visions of Article 29 of the Rules of Proce visions complained of is alone capable of dure of the Court. Furthermore, this com hampering the continuity of employment plaint is unrelated to the general line of ar and the improvement in the working condi gument concerning allocation of scrap and tions and standard of living of the workers. influence on investments. The defendant replies that this complaint, The complaint is not persuasive: it must be which really concerns the infringement of conceded that the successive drafts, which Article 3 (e) of the Treaty, has not been sup after a year were adopted as Decision No ported by any proper evidence.

tion charge. visions of Decision No 2/57, deliberately The new submission relied upon in the re- pursued an objective of its own with regard ply is ultimately a mere attempt to replace, to the applicant. under the guise of misuse of powers, the The applicant states in its reply that the si- line of argument set out in the application.

Pursuant to the provisions of the second paragraph of Article 33 of the Treaty the undertakings referred to in Article 80 may institute proceedings for the annulment of general decisions of the High Authority which they consider to involve a mis­ use of powers affecting them. Decision No 2/57 is a general decision; it establishes a legislative principle, im­ poses abstract conditions for its implementation and sets out the legal conse­ quences entailed thereby. The applicant maintains that it is adversely affected by the contested provisions because it is very difficult for it to effect economies in ferrous scrap and conse­ quently it must pay the supplementary charge if it increases its consumption of bought scrap. The applicant formally alleges that on one or more occasions a mis­ use of powers affecting it has been committed and it produces a relevant statement of reasons leading it to believe that there has been a misuse of powers on one or more occasions. The purpose of the arguments upon which it relies is in fact to obtain a declaration that, when the High Authority adopted the contested provi­ sions, it exercised the powers conferred upon it under Article 53 (b) of the Treaty for purposes other than those for which they were conferred upon it both through serious disregard for certain of the objectives referred to in Article 3, and through the clear intention of attaining objectives specifically governed by Articles 54 and 59 whilst avoiding the special procedures prescribed in the said articles. Consequently the application is admissible.

The equalization and compensation arrangements do not directly affect prices but rather the factors contributing to the formation of prices. In this way those factors, without preventing prices from being freely fixed, modify the level at which they are fixed. The financial arrangements provided for in Article 53 affect by such al­ terations in the level of prices the other characteristic features of the state of the market and in particular the supply of and demand for the relevant products. These arrangements thus constitute powerful and effective intervention proce­ dures at the disposal of the High Authority, but are nevertheless 'indirect' within the meaning of Article 57 of the Treaty as distinct from the direct means of action through establishment of production quotas (Article 58) or the allocation of re- sources (Article 59). The High Authority, by using the financial arrangements provided for in Article 53, is in a position to exercise a broad influence on the market in coal and steel whilst it must be borne in mind that Article 53 restricts the application of such arrangements to the procedures 'necessary for the performance of the tasks set out in Article 3 and compatible with this Treaty, and in particular with Article 65'. The express reference made to Article 3 does not release the High Authority from its duty to observe the other articles of the Treaty and in particular Articles 2, 4 and 5 which, together with Article 3, must always be observed because they est­ ablish the fundamental objectives of the Community. Those provisions are bind­ ing and must be read together if they are to be properly applied. 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 scrap and domestic scrap. Decision No 2/57 continues this system but adjusts it and supplements it with new provisions intended to affect at the

(a) Pursuant to Article 53 (b) of the Treaty the High Authority may, with the unanimous assent of the Council, itself make any financial arrangements which it recognizes to be necessary for the performance of the tasks set out in Article 3. The exercise of the powers thus conferred upon the High Authority is subject to the conditions set out in Articles 2 to 5 concerning the establishment, adminis­ tration and guidance of the Common Market. Pursuant to Article 2 of the Treaty the Community has as its task to contribute to economic expansion, growth of employment and a rising standard of living in the Member States. The means prescribed for the attainment of those objectives consists in the establishment of a Common Market on the conditions laid down in Article 4 concerning the abolition of obstacles to trade. Pursuant to Article 2 the Community is obliged progressively to bring about conditions which will of themselves ensure the most rational distribution of production at the highest pos­ sible level of productivity while safeguarding continuity of employment and tak­ ing care not to provoke fundamental and persistent disturbances in the economies of Member States. To those ends the Community must ensure on the market the establishment, maintenance and observance of normal conditions of competition and, subject to observance of the priorities laid down by Article 57 of the Treaty in relation to its means of action, it must, in accordance with the provisions of Article 5, 'exert di­ rect influence upon production or upon the market only when circumstances so require'. In pursuing the objectives laid down in Article 3 of the Treaty the High Authority must permanently reconcile any conflicts between those objectives considered in­ dividually and, when such reconciliation proves unattainable, must grant such temporary priority to one or other of them as appears necessary having regard to the economic facts or circumstances in the light of which, in carrying out the tasks entrusted to it under Article 8 of the Treaty, it adopts its decisions.

Pursuant to the provisions of Article 57 of the Treaty in the sphere of production, the High Authority is required to give preference to the indirect means of action at its disposal, in particular to intervention in regard to prices. As has previously been stated, such means of action must be regarded as including the financial ar­ rangements provided for in Article 53 since they influence prices in particular through compensation for and correction of factors which contribute to their for­ mation. Since those arrangements contribute to the formation of prices they alter the price-level on the market and thereby influence the effects which the price- level produces on the direction of production, and thus on the structure of the means of production. Such arrangements thus provide the High Authority with the means to modify the effects of 'normal competitive conditions' whilst ensur­ ing, in accordance with the requirements of Article 5 of the Treaty, the mainte­ nance and observance of these conditions. By making appropriate use of this pow­ erful means of intervention the High Authority is largely capable, provided that the circumstances require it, of bringing about the required reconciliation between the objectives listed in Article 3 of the Treaty in carrying out the task with which it is entrusted under the Treaty. The powers which have thus been conferred on the High Authority are however limited by the specific provisions set out in Title HI of the Treaty. In particular these powers would be used for an objective other than their legal purpose if it ap­ peared that the High Authority had applied them with the exclusive, or at any rate the decisive, purpose of evading a procedure especially prescribed by the Treaty in order to deal with the circumstances with which it is required to cope. At the time when the contested decisions were adopted the market in ferrous scrap was widely recognized as being characterized by a severe shortage of Com­ munity supplies, by mounting difficulties in imports and by large-scale and rapid increases in the price of foreign scrap. This situation arising from those economic facts and circumstances cannot in any event be regarded as prima facie excluding intervention by the High Authority to counter the consequences at variance with the requirements of Article 3 of the Treaty which this situation might have in­ volved. Furthermore the High Authority's appraisal of the situation in the light of which the contested provisions were adopted does not by itself show that the authors of the said measures were inspired by an unlawful motive. Accordingly the Court does not consider that the circumstances were such as to rule out, at that time, action by the High Authority on the market in ferrous scrap with a view to affecting indirectly means of production using scrap.

to permit undertakings to adapt 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 accor­ dance with the provisions of Article 3 (a) and the latter part of (d), the second par­ agraph of Article 2 and the third subparagraph of the second paragraph of Article 5 of the Treaty.

JUDGMENT OF 26. 6. 1958

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 to refunds cannot render the rule inequitable in law — which is excluded by the nature of the criterion adopted.

zation of production may lawfully be sought within the framework of a general action on the basis of reconciling the objectives of Article 3, if necessary granting such priority to one or other of them as appears necessary having regard to the si­ tuation arising from the economic facts or circumstances observed at the time of the intervention.

(f) The 'indirect means of action' in relation to production prescribed in Article 57 are to be distinguished from the 'direct influence' referred to in the third sub­ paragraph of the second paragraph of Article 5 not by the aims pursued but by the

JUDGMENT OF 26. 6. 1958

methods appropriate to attain them. Indirect means of action, by affecting, espe­ cially as a result of the financial arrangements under Article 53, certain of the fac­ tors which play a part in forming prices, create conditions which encourage un­ dertakings freely and willingly to choose the behaviour desired by the High Au­ thority for the accomplishment of the tasks with which it is charged under the Treaty. On the other hand direct influence, such as the allocation of resources for which provision is made in Article 59, is not concerned with how producers would behave if they acted freely but directly prescribes, on pain of fines, as is stated in Article 59 (7), the behaviour which the High Authority considers necessary with regard to the situation with which the Treaty requires it to cope. The two procedures, indirect and direct, are intended to modify the structures to which, unless modified by intervention, individual behaviour would give rise. The procedures thus both constitute procedures for economic intervention but the for­ mer create the right conditions to encourage producers freely to adopt the behav­ iour which the common interest, referred to in Article 3, requires of them whilst the latter impose upon undertakings in the same common interest behaviour other than that which they would be prompted to adopt by the actual circum­ stances.

AUBERT ET DUVAL v HIGH AUTHORITY ECSC

Although the High Authority wished at the same time to 'promote a policy of us­ ing natural resources rationally and of avoiding their unconsidered exhaustion', an objective laid down in Article 3 (d) of the Treaty, it also had to take into account the conditions appropriate to various categories of consumers and thus modify the application of the supplementary contribution imposed on the latter in accordance with the variations in their consumption of ferrous scrap. This modification en­ tailed the gradual elimination of the effects of equalization, or even in certain cases their abolition.

The contested scheme was thus intended above all to ensure a regular supply to the market and to promote a policy of using resources rationally. Nevertheless there are no grounds for asserting that, by according temporary priority to certain of the aims set out in Article 3, and consequently only partially reconciling all of the aims set out therein, the High Authority used the powers given it under the Treaty for purposes other than those for which they were conferred. Since misuse of powers has not been established this complaint must be rejected.

2. The complaint of misuse of powers with regard to Article 53 (b), Article 59 and An­ nex II to the Treaty, namely that the High Authority has established a system of priorities and of allocation whilst refraining from observing the formalities pre­ scribed in Article 59 and Annex II

JUDGMENT OF 26. 6. 1958

3. The complaint of misuse of powers with regard to Article 54 of the Treaty, namely that the High Authority penalizes through discriminatory measures the expansion of certain undertakings and confers upon itself wide powers concerning the control of investments

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.

AUBERT ET DUVAL v HIGH AUTHORITY ECSC

5. The complaint of misuse of powers in that, through the provisions of Decision No 2/57, the High Authority deliberately pursued an objective of its own with regard to the applicant

There is no relevant proof of the allegation that the High Authority pursued purely financial and tax objectives with regard to undertakings, such as the applicant, which produce high-quality special steel in solid-charged electric furnaces and that it thereby disguised as a general decision a decision whose sole logical and comprehensible objective is to penalize a category of undertakings. Consequently the complaint is unfounded.

Costs

Under Article 60 of the Rules of Procedure of the Court the unsuccessful party shall be ordered to bear the costs. In the present case the applicant has been un­ successful with regard to the substance of the case and the defendant has been unsuccessful as regards admissibility. In accordance with the second paragraph of

JUDGMENT OF 26. 6. 1958

the said article the applicant must thus be ordered to bear four-fifths of the costs of the proceedings and the defendant to bear one-fifth.

Serrarens Riese Rueff Hammes

Delivered in open court in Luxembourg on 26 June 1958.

M. Pilotti L. Delvaux

President Judge-Rapporteur A. Van Houtte

Registrar

OPINION OF MR ADVOCATE-GENERAL LAGRANGE