C-19/58

JUDGMENT OF THE COURT 10 MAY 1960 1

Government of the Federal Republic of Germany v High Authority of the European Coal and Steel Community

Case 19/58

Summary

1. Fundamental and persistent disturbances — Action by the High Authority — Concept (ECSC Treaty, Article 37)

2. Transport — Principle of non-discrimination — Concept of comparability (ECSC Treaty, Article 70)

In Case 19/58

Government of the Federal Republic of GERMANY , represented by Werner von Simson; Advocate at the Oberlandesgericht Düsseldorf, and Professor Philipp Möhring, Advocate at the Bundesgerichtshof Karlsruhe, with an address for ser­ vice in Luxembourg at the Chambers of Werner von Simson, Bertrange,

applicant,

1 —Language of the case: German.

JUDGMENT OF 10.5.1960 — CASE 19/58

v

gives the following

JUDGMENT

I — Conclusions of the parties II —Facts

The applicant claims that the Court should: The facts may be summarized as follows: After commencing its duties, the High (a) Annul Sections III, IV and V of the de­ fendant's Decision T/10.202 of 12 Feb­ Authority established a programme of work in preparation for a consideration of special ruary 1958, and Sections III and IV of rates and conditions in force in the Member the defendant's Decision T/10.203 of 12 States and in particular of those applicable February 1958, in so far as they state that the special rates and conditions in to the carriage of mineral fuels and ores, force are not in accordance with the which is one of its tasks under the provi­ ECSC Treaty and in so far as they re- sions of the Treaty, and the adoption of the necessary measures. quire that measures be taken so as to abolish them; Those concerned were given an opportunity of putting forward their point of view at (b) Order the defendant to bear the costs of meetings which took place with representa­ the proceedings. tives of the German Government and of the Lander. Documents were exchanged. The The defendant contends that the Court High Authority undertook an inquiry into should: the general economic situation and into the situation of the iron and steel industry in Dismiss the application of the Government the regions concerned. of the Federal Republic of Germany as un­ founded with all legal consequences. The High Authority states that it took the

GERMANY v HIGH AUTHORITY

In objectives set out in Articles 2 and 3 of the fact it exercised them by adopting the deci Treaty. sions during its meeting of 9 February. It clearly appears from the two letters sent to The High Authority also ordered that cer the Federal Government on 12 February tain rates and conditions, described by the 1958 that they do not constitute decisions Federal Government as competitive rates, properly so-called but merely the formal be abolished, on the ground that it did not communication of those decisions to the consider them justified by competition addressee. Such communication is relevant from another means of transport.

1. The submission as to lack ofjurisdiction (a) The applicant points out that the trans The defendant replies that the complaint of itional period laid down by the Convention lack of jurisdiction thus put forward is not on the Transitional Provisions expired on relevant. That it exceeded the 'legitimate 10 February 1958, and it raises the question aims' of the Treaty does not prove the whether a decision allegedly taken by the alleged lack of jurisdiction. In order to de High Authority at its meeting on 9 Febru fine submissions, it is necessary to distin ary but which was brought to its attention guish between the power to act and the pur only by letter dated 12 February and which pose or objective of the action. it received only on 14 February, can be con sidered as having been taken within that 2. The submission as to infringement of the transitional period.

According to the applicant, the principle of A —The interpretation of Article 70 of the legal certainty requires that individuals Treaty may not be subject, after the expiry of that period, to decisions which have been taken The applicant considers that the High

JUDGMENT OF 10.5.1960 — CASE 19/58

Authority has interpreted Article 70 of the cover special situations in accordance with Treaty too restrictively. the fourth paragraph of Article 70. Yet the purpose of that particular provision of the (a) By virtue of the first paragraph of the Treaty is to subject the application of special above-mentioned article comparably placed rates and conditions in respect to undertak­ consumers must be offered comparable ings in the coal and steel industries to a spe­ rates for the carriage of coal and steel. The cial control by the High Authority and to applicant says that it appears from the con­ specific material conditions. tested decisions that, in dealing with the question whether consumers are compara­ (b) Furthermore, the applicant complains bly placed, the High Authority has con­ that in the contested decisions the High sidered the matter exclusively with refer­ Authority interpreted the words 'special in­ ence to 'comparable conditions from the ternal rates and conditions in the interest of point of view of transport' (cf Decision one or more coal-or steelproducing under­ T/10.203 on the carriage of coal: III, A, 1, takings' in the fourth paragraph of Article (b), second paragraph; II, second paragraph; 70 in such a way that the only reason which III, second paragraph; IV, second para­ it has accepted as justifying the authoriza­ graph; V, second paragraph; B, first para­ tion of special rates is the particular situa­ graph; C, II, second paragraph; decision tion of each undertaking concerned. It has T/10.202 on the carriage of ore: HI, 1, (a), refused also to take into consideration con­ first paragraph; 2, first paragraph; (b) second ditions of a general character which could paragraph). justify a special rate, such as the fact that it appears desirable to aid undertakings situat­ The applicant argues that the first paragraph ed in depressed areas, and to do so not so of Article 70 cannot be interpreted so res­ much in the interest of the said undertak­

(c) According to the applicant Article 70 The defendant replies that so wide an inter­ cannot be considered in isolation. In order pretation of the first paragraph of Article 70 to apply it one must also look at the general would render the fourth paragraph on spe­ objectives of the Treaty. On this point, the cial rates virtually meaningless in practice. applicant refers in particular to the second paragraph of Article 2 and to Article 3 (d) of From the meaning to be given to the fourth the Treaty. paragraph of Article 70 it is clear that the particular situations of undertakings in the The High Authority, according to the appli­ Community, apart from conditions of cant, has not taken sufficient account of the transport properly so-called, which are of an following factors: economic, technical or social nature must not be included in the general concept of 1. What is involved is the working of min­ discrimination contemplated in the first eral deposits situated on the territory of paragraph of Article 70. If they were, no the Common Market. Aid granted to place would remain for particular rules to undertakings working those deposits

GERMANY v HIGH AUTHORITY

This in 3. In a certain number of cases, aid to un volves in particular the undertakings Max dertakings situated near the frontier be imilianshütte at Sulzbach-Rosenberg and tween West Germany and the Soviet Luitpoldhütte at Amberg in Bavaria. zone is involved. Here again, it must be noted that the closure of such undertak The complaint is directed against the High ings would have extremely serious re- Authority's view—on the basis of which it percussions on the whole region in lowered the reduction provided for by rate which they are located, for those regions 6 B 31 from 21% to 8%—that it was neces are already experiencing unfavourable sary to take into account the fact that those economic conditions as a result of the two undertakings enjoyed sizeable tariff re- existence of that frontier. ductions prior to the situation resulting from the war. Upon reading the application and the reply, the defendant takes it that the applicant is The applicant takes the view that even if the saying that the protection of certain under reduction of 13% previously granted was takings and the jobs that go with them is of not based on reasons consonant with the such importance that the application of the Treaty, the question which should have fourth paragraph of Article 70 is justified by been asked is whether the total reduction of the sole reason that special rates can be use 21% was not justified by reason of the con ful for the pursuit of those objectives. The sequences of the establishment of the fron High Authority refutes this proposition, tier zone, that is in practice the setting apart alleging that the principles of non-discri

This that the abolition of the rates would have discretion as to fact is not subject to review profound consequences in sectors of the by the Court (first paragraph of Article 33, economy to which the ECSC Treaty does second sentence). not apply. It refers to Articles 80 and 82 of the EEC Treaty and considers that the High The defendant then points out that, accord Authority should take account of them. ing to statements made by the Federal Gov-

Furthermore, the High Authority was well On yet another point, the applicant is of the aware that in the light of further experience opinion that the High Authority has had in­ this division of the tariff reductions might sufficient regard to the independence of na­ be insufficient to take into account all the tional transport undertakings: this point economic and social difficulties en­ concerns the text of the contested decisions countered by the two undertakings by rea­ relating to competitive rates. According to son of the political division of Germany. the applicant, the lowering of rates is admis­ That is why it included in its decision a cor­ sible in cases where rates are coordinated rective margin of 4%. with or adapted to competition 'where the undertaking considers that it must take a (e) Since the present case relates to the ap­ measure of this kind'. plication not only of Article 70 of the Treaty but also of the seventh paragraph of Article The defendant opposes this way of thinking, 10 of the Convention, the applicant com­ saying that the Treaty prohibits subsidies. plains that the High Authority has not suf­ The defendant considers that the tariff pol­ ficiently observed the duty which the latter icy of the Federal Railways constitutes a provision imposes on it to allow such time part of the economic policy of the Federal for the modification of the rates in force Government. when the High Authority is set up as may be necessary to avoid any serious economic As regards competitive rates, the High Au­ disturbances. The applicant interprets this thority is of the opinion that it had a duty to provision as meaning that special rates must be authorized when such disturbances examine whether each special rate was a protective rate or was a rate intended to would be inevitable notwithstanding the meet competition from a particular quarter: grant of such periods. in the latter case it did not oppose the rates. In answer to this complaint the defendant Accordingly, it denies having infringed the states that the seventh paragraph of Article fifth paragraph of Article 70. 10 only says that in respect of certain special rates the High Authority 'shall allow such B — Infringement of other provisions of time for their modification as may be neces­ the Treaty sary to avoid any serious economic distur­ bance'. It is a logical precondition of this re- In parallel to the applicant's arguments set quirement upon the High Authority that out above, another line of argument is to be the authors of the Treaty envisaged that se­ found in the application and in the reply. It rious economic disturbance might occur at may be summarized as follows.

First, the fact that it has been accepted that As a further point, in the reply, the applicant the partition arising for political reasons has puts forward the submission of misuse of involved the undertakings of the Bavarian powers by reason of the fact that the High Upper-Palatinate in a loss amounting to 8% Authority applied not Article 67, but the instead of the 21 % claimed and that the procedure under the seventh paragraph of Article 10 of the Convention. tariff reduction was fixed in consequence thereof; The defendant replies that this complaint, Secondly, the fact that in the case of the Up­ put forward in the reply, cannot be taken per-Palatinate the location of the undertak­ into consideration because it has been put ings near to the Eastern zone was taken into forward too late. consideration, which was not the case for the steel works at Peine and Salzgitter (De­ As regards the submissions based on man­ cision T/10.203, III, C). ifest failure to observe the provisions of the Treaty, the defendant replies that possible On the first part of this complaint, the de­ repercussions of the contested decisions on fendant quotes the part of the decision at is- sectors of the economy other than that of sue which, it says, contains sufficient rea­ coal and steel are the necessary conse­ sons. quence of the partial nature of the integra­ tion involved and that, therefore, the fact As for the second part, the defendant points that those repercussions occur cannot prove out that in considering the protective rates that there has been a manifest failure to ob-

The contested decisions, being decisions adopted in application of the seventh para­ graph of Article 10 of the Convention, cannot be considered as orders for com­ pliance under Article 88. Therefore the application, in so far as it is based on that provision, is wholly unfounded.

It also appears from the content and from the history of the said decisions that they do not constitute findings that the applicant has failed to fulfil its obligations. In fact, it appears from a reading of the seventh paragraph of Article 10 of the Con­ vention that special rates and conditions in force upon the establishment of the Community were to be considered as legal until such time as the High Authority had taken a decision concerning them. Therefore a decision under Article 88, in­ volving a finding that the applicant government had failed to fulfil an obligation, was inconceivable during that initial period.

As regards the applicability of Article 37, the applicant has alleged and offered to prove that both before and after the adoption of the contested decisions it drew the attention of the High Authority to the fact that, in its opinion, the rules en-

GERMANY v HIGH AUTHORITY

visaged might provoke fundamental and persistent disturbances in the German economy.

It appears from the oral arguments and from the explanations furnished at the hearing that the decisions communicated by letter of 12 February were adopted on the evening of 9 February 1958 and that all the details of the decisions were fixed on that date, as is proved by the production of the drafts discussed at that meeting and by the minutes thereof.

It also appears from information produced by the parties that the fact that those decisions were adopted only on the last possible date is to be explained by a last- minute approach by the Federal Government, the applicant in this case, asking the High Authority to reconsider its position, which was already well known, and by the desire on the part of the High Authority not to fail in its duties in respect of that government, which led it to postpone the formal adoption of those deci­ sions so as to be able to deliberate upon them afresh.

JUDGMENT OF 10.5.1960 —CASE 19/58

In order to enter into force, those decisions had to be notified to the Federal Gov­ ernment and, in accordance with the rules of good administration, notified as quickly as possible—which was done. Nevertheless, that does not in any way alter the fact that in this case the decisions were adopted during the transitional period.

Thus there is no doubt that the contested decisions were taken within due time.

The submission as to infringement of the Treaty

In giving expression to that intention, they cannot have been unaware that the transport industry constitutes a branch of industry which is independent of that of the production of coal and of steel and that it has its own problems, needs and procedures. Nor can they have failed to understand that so long as that industry

GERMANY v HIGH AUTHORITY

has not been integrated into the common market, its distinct nature must be re­ spected and that measures taken must be confined to those necessary to prevent it from jeopardizing the objectives of the Treaty by its actions.

Accordingly, as regards international transport, Article 70. whilst envisaging the ultimate harmonization of national rates and conditions, leaves tariff policy un­ controlled and confines itself to the requirement that within each national system any discrimination based on the point of departure or destination must be abol­ ished.

Similarly—as is shown by the fifth paragraph—in respect of internal transport, Member States are free to practise their own commercial policy, subject to the pro­ visions of the Treaty.

There can be no doubt that the States or transport undertakings would come into conflict with those provisions if, in setting their rates and conditions, they took into account the advantages and disadvantages of the location of undertakings producing coal and steel or of the quality of the deposits worked.

JUDGMENT OF 10.5.1960 — CASE 19/58

considerations of general economic policy such as whether it was expedient to ap­ prove protective measures which might appear desirable in favour of critical areas and under-privileged regions. In support of its arguments it points to the provi­ sions of the second paragraph of Article 2 and Article 3 (a), (d), (e) and (g).

The fifth paragraph of Article 70 does indeed ensure respect for the sovereignty of the Member States as regards their general policy on transport. However, the provisions of Article 4 and also the other paragraphs of Article 70 run directly counter to the idea that the Member States are free to include the coal and steel industry in any policy for the siting of industries or to continue the practice of sub­ sidies in the form of the grant of special rates and conditions to undertakings prod­ ucing coal and steel. For if this power remained available to the six Member States it could prevent the establishment of the common market, particularly since the principles of general transport policy adopted in the six countries are different.

The applicant has also referred to Article 2 of the Treaty, which provides that 'The Community shall progressively bring about conditions which will of themselves ensure the most rational distribution of production at the highest possible level of productivity, while safeguarding continuity of employment and taking care not to provoke fundamental and persistent disturbances in the economies of Member States'.

This provision, while expressing two reservations, clearly states the essential ob­ jective of the common market, according to which the general policy of the High Authority must be to promote—and this also applies in the application of Article 70—the progressive establishment of conditions which will of themselves ensure the most rational distribution of production.

It would in any case be contrary to the meaning of the Treaty to authorize existing special rates on the sole ground that it would be difficult or impossible for the undertakings concerned to adapt themselves to the common market.

If such were indeed the position, it would at the most have been open to the High Authority to lay down longer periods, but the applicant does not even set out any reasons for a complaint that the contested decisions set periods which were too short.

Therefore, neither Article 2 nor Article 3 of the Treaty may be relied upon in sup­ port of the proposition that, in applying the fourth paragraph of Article 70, the High Authority is required, as a general rule, to authorize special rates when the profitability of an undertaking might be adversely affected if such rates did not exist.

4. On the contrary, when economic conditions in the transport sector do not re­ quire or justify special rates (which is the case notably when competition from an­ other means of transport must be counteracted), it is only in exceptional cases that a special rate can be considered to be in accordance with the principles of the Treaty.

The High Authority has recognized the existence of such an exceptional case as regards certain undertakings situated near the interzonal frontier.

In that case, the disadvantages are created by factors which are not of an economic nature, and in particular by political contingencies which have separated these undertakings from their natural market, with the result that they require support either to be able to adjust themselves to the new conditions, or to be able to overcome this accidental disadvantage.

The Court is not of the opinion that this approach is irregular, in view of the facts, first, that other undertakings located in the same regions enjoy a reduction of about 8% and, secondly, that in its decisions the High Authority has made pro­ vision for a corrective margin of 4%.

The submission as to infringement of essential procedural requirements

The applicant alleges that insufficient reasons are given for the decisions in that, first, they set the tariff reduction for the undertakings of the Upper-Palatinate at 8% and that, secondly, they did not take into consideration the fact that the steel works at Peine and Salzgitter are situated near to the Eastern zone, a criterion which was applied in respect of the undertakings of the Upper-Palatinate.

These allegations cannot be accepted.

As regards the first point, sufficient reasons are given for the decision by the ref­ erence to the comparison established between the special rates in force before and after the war.

GERMANY v HIGH AUTHORITY

Since the submission of misuse of powers had already been raised, this second complaint could legitimately appear for the first time in the reply. However, it must be rejected for the same reasons as the first.

Therefore the application submitted against the decisions of 9 February 1958 must be dismissed.

Costs

The applicant has failed in all its submissions and must therefore bear all the costs.

On those grounds,

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral observations of the parties; Upon hearing the opinion of the Advocate-General; Having regard to Articles 2, 3, 4, 15, 33, 37, 67, 70 and 88 of the Treaty establishing the European Coal and Steel Community, and to Articles 1, 10 and 23 of the Con­ vention on the Transitional Provisions annexed to that Treaty; Having regard to the Protocol on the Statute of the Court of Justice of the Euro­ pean Coal and Steel Community; Having regard to the Rules of Procedure of the Court of Justice of the European Coal and Steel Community, and to the rules of that Court on costs,

Delivered in open court in Luxembourg on 10 May 1960.

A. Van Houtte A. M. Donner

Registrar President

OPINION OF MR ADVOCATE-GENERAL LAGRANGE (See Joined Cases Nos 3/58 to 18/58, 25/58 and 26/58, page 393)