C-12/57

JUDGMENT OF 26. 6. 1958 — CASE 12/57

Although economic circumstances justify measures concerning the financial charge im­ posed upon undertakings those measures must not be more restrictive than is necessary for the purpose of the financial arrangement (Articles 53 (b) and 65 (2) (b))

In Case 12/57

between

Syndicat de la Sidérurgie du Centre-Midi , a trade association governed by French Law, having its head office in Paris, represented by its President, Henri Vicaire, assisted by Henri Levêque, Advocate at the Cour de Paris, with an address for service in Luxembourg at the Chambers of Georges Reuter, 1 Rue de l'Arsenal,

applicant,

Advocate-General: M. Lagrange Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact

I. Facts the equalization of the prices of imported ferrous scrap and domestic scrap and the ef­ In Decision No 2/57 which extends the ap­ fecting of economies in scrap. It requires, in plication of Decisions No 26/55 and No addition to contributions at the basic rate, 3/56, the same arrangement provides for contributions at a supplementary rate im-

SIDÉRURGIE DU CENTRE-MIDI v HIGH AUTHORITY ECSC

26 January 1957. This arrangement may be utive months between 1 January 1953 and contrary to certain individual interests but 31 January 1957). the High Authority considered that a bal Article 8 of the decision imposes upon un ance had to be established with those indi dertakings a gradually increasing contribu vidual interests, as is required by a wider tion whilst Article 9 permits undertakings view of the general interest of the Commu which have reduced the specific input of nity. their plant or their production processes, to reduce or even completely to eliminate II — Conclusions of the parties their contributions at the supplementary

should: (2) The blast furnaces use a larger propor tion of scrap in order° o reduce the manga 'dismiss the application submitted against nese content of local ore in the production Decision No 2/57 in that it is not vitiated by of pig-iron castings; misuse of powers affecting the applicant, with all the legal consequences thereof, in (3) Almost all the steel works are isolated particular with regard to settlement of the from the blast furnaces and cannot operate fees, costs and any other expenses.' on a liquid charge since the means of pro ducing steel are of necessity limited to III — Submissions and arguments Martin furnaces or to electric furnaces, and of the parties in the Centre-Midi regions electric furnaces cannot carry out duplex processes. Electric A. The admissibility of the application furnaces in these regions thus have higher specific input references for ferrous scrap 1. Whether a misuse of powers has indeed than the average for the Community and in been directed against the applicant asso the present state of technology they cannot ciation itself

JUDGMENT OF 26. 6. 1958 — CASE 12/57

Nevertheless, the adopted provisions more restrictive than undertakings producing special steel in the their purpose requires and has brought Centre-Midi are no worse off for effecting about a discrimination in that it accords like economies in ferrous scrap than undertak treatment to situations which are not com ings of the same kind situated in other parts parable (Treaty, Article 65). of the Common Market. If differences exist in this respect, they are rather between (7) Fourth alternative complaint: the con producers of ordinary steel and producers of tested decision gives rise to grave social

2. Whether the submissions really consti The defendant remarks that the applicant in tute complaints of misuse of powers its reply does not dispute that it is necessary to distinguish between the objective and The High Authority draws up a classifica the effect of a decision but it considers that tion of the seven complaints in the applica in the present case the applicant has in fact tion. called the objective in question. The de fendant concludes that this constitutes a (1) First principal complaint: the High Au change in the line of argument submitted in thority has selected as its sole objective the relation to the application, which expressly attainment of economies in ferrous scrap to called in question the effects of the contest the exclusion of other objectives which ed provisions. must also determine its action (Treaty, Ar The High Authority takes note of those ob ticle 3). servations and draws the necessary distinc tion between the objective and the content (2) Second principal complaint: the High of the contested provisions to group the Authority has pursued as its principal and complaints of the applicant association un clearly-defined objective the allocation of der two heads, the second of which will ferrous scrap (Treaty, Article 59). only be examined as an alternative.

SIDÉRURGIE DU CENTRE-MIDI v HIGH AUTHORITY ECSC

Article 9 adverse Centre-Midi have a specific interest in con ly affects all undertakings equipped with testing the provisions relating to the supple Martin furnaces and solid-charged electric mentary rate and to the reference consump furnaces, which are used in all the plant of tion. the Centre-Midi. Article 6 (3) adversely af The applicant continues that the High Au fects all the undertakings in the Communi thority maintains that the complaints raised ty since they are all capable of drawing up against it constitute mere effects or results investment programmes to be put into of the contested decision. By altering the operation after 31 January 1958.

That is that consideration of the results foreseen why the two aspects of Decision No 2/57, makes it possible to discern the real inten the equalization of scrap imported from tion of the High Authority and the objec third countries, on the one hand, and econ tives which it pursues. It was impossible for omies in ferrous scrap, on the other, reflect the High Authority not to take into account the same wish to ensure a regular supply to the situation in which its decision would in the Common Market.

Treaty. The applicant maintains that, whilst it is Second complaint: The High Authority has true that the objective of the equalization pursued as its principal and clearly-speci scheme set out again in Decision No 2/57 is fied objective the allocation of ferrous to ensure a regular supply of ferrous scrap, scrap. the new provisions in the decision have The applicant states that the real and clear quite another objective: to fix the supply of ly-specified objective of the contested deci ferrous scrap at the level of the reference pe sions is twofold: on the one hand, the allo riod and to influence investments. cation of ferrous scrap and, on the other, the It is the phrase appearing in the introduc influencing of investments.

JUDGMENT OF 26. 6. 1958 — CASE 12/57

Neither of those two tailed by the equalization scheme of encou objectives can be pursued under Article 53; raging an increase in the consumption of the decision is accordingly vitiated by mis ferrous scrap and that, consequently, they use of powers. merely constitute an arrangement for the Moreover, the wider and more flexible ap compensation and regularization of prices plication of Article 53 confers upon the in accordance with the provisions of Article High Authority a liberty of action which it 53.

The con which the applicant advances indicates a tested provisions, and in particular the pro confusion between the concepts of the ob visions of Article 6 (3) of the decision show jective and of the result. It is true that the a well-defined intention automatically to result of the contested provisions is not de impede as much as possible new invest termined: some undertakings may prefer to ments, a short-term objective, pursuit of pay the supplementary contribution rather which is claimed to render possible the at than renounce an increase in their con tainment of the final objective, economies sumption of ferrous scrap; Decision No in ferrous scrap. 2/57 does not guarantee that in no case will There is in addition misuse of powers in there be an increase in the consumption of that the defendant, in order to prevent in

prevent this. The applicant's line of argu The defendant replies that the allegation ment implies the prohibition in principle of that the High Authority pursued the ob all indirect action exercised on quantities jective of preventing new installations through prices, which completely contra amounts to confusing the concepts of the dicts the provisions of the Treaty, in parti objective and of the result. The applicant in cular those of Articles 5 and 57. fact complains that the High Authority has With regard to misuse of procedure the ap disregarded the objectives laid down in Ar plicant's line of argument indicates that it ticles 3 (d) and (g). The applicant argues as

Fourth complaint: The High Authority im­ Reduction of the specific input reference of posed upon certain undertakings a special electric furnaces is not technically impossi­ charge prohibited by Article 4 (c) of the ble. Decision No 2/57 does not involve an Treaty. arbitrary distinction to the disadvantage of The defendant observes that the applicant is a specific category of producers and, more­ clearly mistaken in relying upon the provi­ over, is not capable of distorting competi­ sions of Article 4 (c), which prohibit subsi­ tion between categories of producers, dies or aids granted by States, or special whose products, special steel, on the one charges imposed by States, in any form hand, and ordinary steel, on the other, are whatsoever; in fact the wording shows that not in competition with each other. this relates only to measures adopted by States. Sixth complaint: The High Authority has, contrary to Article 65, adopted provisions Fifth complaint: The High Authority has which are more restrictive than is necessary established an unfair system for the under­ for their purpose. takings and is guilty of discrimination in The defendant considers that a confusion that it has accorded equal treatment to situ­ exists in connexion with the wording of Ar­ ations which are not comparable (Article 4 ticle 53 of the Treaty. According to Article (b) of the Treaty). 53 (a) the financial arrangements set up According to the applicant, Article 9 of the through the agreement of a number of un­ contested decision establishes a discrimin­ dertakings must be 'necessary for the per­ ation between the undertakings in that re­ formance of the tasks set out in Article 3 bates are not equally available to each un­ and compatible with the Treaty, and in par­ dertaking and in respect of all kinds of ticular with Article 65'. Article 53 (b) con­ plant. This system results in establishing an fers upon the High Authority power itself to unfair system amongst the undertakings; make 'any financial arrangements serving the contested measures treat as equivalent the same purposes'. If the words are to be situations which are not comparable, in par­ given their precise meaning, it is absolutely ticular with regard to plant and manufactur­ clear that the requirement of compatibility

According to the applicant's statutes it constitutes a private association governed by French law having as its objective the furtherance and defence of the general interests of iron and steel producers; it is common ground that the contested pro­ visions of General Decision No 2/57 are capable of affecting certain interests, even though perhaps divergent, entrusted to the applicant. The applicant accordingly has capacity to institute proceedings before the Court of Justice in accordance with the provisions of Articles 33, 48 and 80 of the Treaty. The applicant formally alleges that its members have been affected by misuse of powers on one or more occasions; it produces a relevant statement of the reasons leading it to believe that there has been a misuse of powers on one or more oc­ casions. The purpose of the arguments upon which it relies is in fact to obtain a declaration that, when the High Authority adopted the contested provisions, it ex­ ercised 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 dis­ regard 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.

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

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 Article 53 affect by such alterations 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 arrange­ ments thus constitute powerful and effective intervention procedures at the dis­ posal 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 est­ ablishment of production quotas (Article 58) or the allocation of resources (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 same time the price of ferrous scrap and the total volume of purchases in order

(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 III 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.

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.

SIDÉRURGIE DU CENTRE-MIDI v HIGH AUTHORITY ECSC

(e) Pursuant to Article 3 (d) and (g) of the Treaty the institutions of the Commu­ nity, and particularly the High Authority in exercising the powers conferred upon it by Article 53 (b), are required to ensure the maintenance of conditions which will encourage undertakings to expand and improve their production potential and promote the orderly expansion and modernization of production and the improve­ ment of quality. The High Authority refers to those legal objectives at the begin-

JUDGMENT OF 26. 6. 1958 — CASE 12/57

(f) 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. Consequently, as has been stated, 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 circum­ stances and the reasonably foreseeable 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 exhaus­ tion. The distinctions which may consequently prove necessary to maintain con­ ditions which will encourage undertakings to expand and improve their produc­ tion potential and to promote its regular development nevertheless must be based upon purely objective criteria in accordance with the 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

(g) 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 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.

it can scarcely be anticipated that technical developments will bring about a not­ able 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 fall in the price brought about by equalization. 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.

The establishment of the supplementary contribution and the refusal of a ref­ erence 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 na­ ture, affects the field of competition and production. None of the arguments put forward constitutes sufficient proof in law that in this respect the system may be treated as equivalent to the allocation for which provision is made in Article 59 and Annex II.

JUDGMENT OF 26. 6. 1958 — CASE 12/57

3. The complaint of misuse ofpowers in that the contested provisions are intended to prohibit certain investments

Article 54 of the Treaty confers upon the High Authority certain powers in co-or­ 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 Ar­ ticles 3 and 53 (b) read together, are vitiated by misuse of powers with regard to Article 54. The applicant has completely failed to establish that the High Author­ ity's sole, or at any rate principal, purpose in having resource to the contested pro­ visions 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.

6. The complaint of misuse of powers with regard to Article 65 of the Treaty in that by establishing the system amounting almost to a prohibition with regard to plant and manufacturing processes put into operation after 31 January 1958 the High Authority enacted measures which were more restrictive than their purpose required

It has been established above that the economic circumstances observed at the

time of the High Authority's intervention on the market in ferrous scrap justified the enactment of the measures complained of with regard to the financial burden of equalization and that, in particular, these measures might properly include the establishment of a progressive rate and the allocation of the financial charge in terms both of tonnages consumed, of periods of consumption and of the nature of the plant. Accordingly those measures are not more restrictive than is necessary for the pur­ pose of the financial arrangement so that, even if Article 62 (2) (b) applied to them, the condition which it requires would be fulfilled. Accordingly the complaint based on failure to observe Article 65 is irrelevant.

7. the complaint of misuse of powers with regard to Article 3 (e) of the Treaty in that the contested provisions give rise to acute and wide-spread social problems which must inevitably continue if the said provisions are applied

The applicant has not furnished further details of this complaint in the course of the proceedings nor has it supplied any proof of its allegation. Consequently the complaint based on misuse of powers with regard to Article 3 (e) of the Treaty must be rejected.

Declares that the application is admissible but unfounded and consequently dismisses the application for the annulment of the provisions contained in Articles 3 (1) (b), 4 (3), 5, 6, 8 and 9 of Decision No 2/57 of the High Authority dated 26 January 1957;

Orders the applicant to bear four-fifths of the costs of the proceedings and the defendant to bear one-fifth thereof.

Pilotti van Kleffens Delvaux

Serrarens Riese Rueff Hammes

Delivered in open court in Luxembourg on 26 June 1958.

M. Pilotti L. Delvaux