C-14/59

JUDGMENT OF 17. 12. 1959 —CASE 14/59

6. Discrimination — Comparable situations — Exemptions granted within the framework of financial arrangements — Integrated and independent steel foundries; foundries engaged in pre-melt and foundries engaged in melt — Importance of the raw materials used and of the production plant

There is no discrimination if, within the engaged in pre-melt similar protection framework of financial arrangements under against foundries engaged in melt, since the which undertakings consuming ferrous first two categories of undertaking operate scrap have to pay contributions, the High with the same production plant and use the Authority exempts integrated steel foundries same raw materials, whereas there is no so as to protect them from competition from such similarity between the second two independent steel foundries while at the categories, with the result that the two com­ same time refusing to grant foundries petitive situations are not comparable.

7. Common market — Concept of common interest — Adverse effect on the normal condi­ tions of competition

v

HIGH AUTHORITY OF THE EUROPEAN COAL AND STEEL COMMUNITY, represented by its Legal Adviser, Emile Reuter, acting as Agent, assisted by Tony Biever, avocat- 1—Cf. Summary of Case No 15/57 Rec. 1958 p. 159, No 5.

PONT-À-MOUSSON v HIGH AUTHORITY

avoué in Luxembourg, with an address for service in Luxembourg at its offices, 2 place de Metz,

defendant,

Application for the annulment of the letter of the High Authority to the applicant of 24 January 1959,

I — Facts beforementioned molten pig iron or, alter­ natively, had the right to be exempted from The facts of this case may be summarized as payment. follows: The High Authority, after it had consulted The applicant produces pig iron castings the Joint Bureau of Ferrous Scrap Con­ and in particular pipes and accessories for sumers which gave an unfavourable opi­ piping. At its ironworks at Pont-à-Mousson nion, had several meetings with the appli­ (Meurthe-et-Moselle) it uses the technique cant's representatives. Since these talks known as 'pre-melt', which consists in failed to reconcile the two conflicting views, casting the molten pig iron from the blast the High Authority sent the applicant a furnaces directly into centrifugal machines letter of 24 January 1959 in which it said or moulds, without passing through the solid that it did not see its way to granting the re- state. quest. That letter is the subject-matter of The plantiff regularly paid its contributions this application. to the Imported Ferrous Scrap Equaliza­ tion Fund up to 1 December 1956. II — Conclusions of the parties However, by a letter of 19 April 1957 it notified the High Authority that in its opi­ The applicant in its application claims that nion it did not have to pay the levy on the the Court should:

JUDGMENT OF 17. 12. 1959 — CASE 14/59

The submissions and arguments of the par­ Take note that the High Authority leaves ties may be summarized as follows: the question whether the letter at issue of 24 January 1959 is a decision within the 1. Admissibility meaning of Article 14 of the Treaty to be Although the defendant states that it leaves determined by the Court, and decide as to the question of admissibility 'to be deter­ this question as it shall think fit in accor­ mined by the Court', it doubts whether the dance with the law; disputed letter is a decision. It points out Dismiss the application directed against that it is not 'an enforceable decision such as the letter of the High Authority of 24 is usually adopted following a refusal to dis­ January 1959 in so far as the applicant charge a pecuniary obligation'. asks that the decision adopted be an­ The applicant asserts that there can be no nulled on the ground that it infringes the doubt that the letter in question is a deci­ Treaty, with all the attendant legal conse­ sion. That letter affirms that the applicant quences, in particular as far as concerns has to pay amounts which in its opinion it the payment of fees, costs and any other does not owe. Further, it was followed by disbursements; the 'first step in execution proceedings', as Alternatively, if the Court makes its deci­ the High Authority instructed the Associa­ sion conditional upon the applicant's ad­ tion of Scrap Consumers, through the ducing certain evidence, take note of the Equalization Fund, to calculate and de­ fact that the High Authority disputes mand payment of the disputed contribu­ the admissibility and relevance of the tions. evidence founded upon by the applicant in its present form; in these circum­ 2. The substance stances order the applicant to strike out, modify and supplement the said evidence First complaint: Infringement of Articles having regard to the preceding considera­ 53, 80 and 81 and of Annexes I and II to the tions; in these circumstances reserve the ECSC Treaty. costs.' The applicant takes the view that it is not The applicant in its reply claims that the an undertaking within the meaning of Arti­ Court should: cle 80 of the Treaty because:

1. The foundry pig iron which it produces must also apply to pig iron and comes to the is not one of the products referred to in conclusion that 'the exclusion of the the Treaty. foundry industry entails . . . the exclusion of 2. The applicant is not engaged in an 'iron molten metal used in the foundry operation and steel' activity. Moreover, the Treaty of casting by cooling alone'. only covers activities of the iron and steel (a) The situation of a foundry engaged in industry proper and does not include pre-melt, such as the factory at Pont-a- those of foundries. Mousson, must be compared rather to On the other hand, the defendant maintains that of an independent steel foundry that the pig iron produced by the applicant than to that of an integrated steel and its industrial activities do indeed fall foundry.

Although the applicant prepares and other pig iron' found under reference No 4200 of Annex I only the molten pig iron in its blast furnaces it covers foundry pig iron. <apnote>1</apnote> would be unrealistic to regard it as a steel (b) In administrative and technical ter undertaking with an integrated foundry. Note 3 to Annex I to the ECSC Treaty read minology the expression 'pig iron' as a whole shows that any undertaking- ['fonte brute'] refers only to solid pig iron. foundries being selected as an ex ample — the production whereof is not 'an It is the second argument which the appli activity of the steel industry proper' does cant endeavours to support with various not fall within the jurisdiction of the Com considerations based on the wording of

steel works. However, in this case the High The applicant relies on the fact that the Authority regarded the effects of this authors of Annex I, Note 3, as regards steel, separation as being unacceptable in practice drew a clear distinction between the iron and by Article 10(d) of Decision No 2/57 ex and steel industry and the foundries, the empted the said foundries from equaliza tion. former but not the latter — to the extent to which they are independent — coming (b) Is the fact that the applicant prepares within the jurisdiction of the ECSC. The its molten pig iron in blast fur applicant maintains that this distinction naces — instead of utilizing the usual 1 -Translator's note: The French for this expression is 'fontes de fonderie brutes*, literally 'crude foundry pig iron'.

product than steel'. In reply to Point 2 (Does the applicant un­ (c) Comparison between foundries engaged dertaking fall outside the jurisdiction of the in pre-melt and those engaged in melt ECSC by reason of the technical and ['fonderies de premiere et de deuxième economic structure of its works?) fusion'] 2 (a) (The position of foundries engaged in As the defendant itself admits, the Treaty pre-melt in the system of Annex I) does not apply to foundries engaged in melt, which buy solid pig iron and then melt it According to reference No 4200 of Annex I, down a second time. Nevertheless, the com­ all undertakings which produce foundry pig position of the molten pig iron prepared by iron fall within the concept of 'undertaking' those foundries does not differ from the pig contained in Article 80, whether that pig iron prepared by the applicant. iron is cast directly into foundry moulds or The applicant does not accept the distinc­ not. But why, in these circumstances, are tion drawn by the defendant in this connex­ not all pig iron foundries undertakings ion between the 'production' and 'remelting' within the meaning given to that word in of pig iron. It endeavours to show that the Treaty, inasmuch as they prepare their foundries using the melt process are engaged own molten pig iron? in production in the same way as the appli­ As far as production of steel for castings is cant. concerned, the Treaty has drawn a clear dis­ tinction which it does not make in the case

B — Arguments put forward by the defen­ of pig iron foundries. Nevertheless, the dant provision inserted in paragraph (b) of Annex II presupposes that some pig iron In reply to Point 1 (Is molten pig iron an foundries at least are outside the jurisdiction ECSC product?) of the Community. This being the case, the defendant has from the very beginning General observations regarded undertakings which produce pig The defendant expresses the view in its iron, but not those which merely re-melt it, statement of defence that the wording of as 'undertakings' within the meaning of Ar­ reference No 4200 of Annex I — 'Foundry ticle 80.

engaged in melt. Even if it was thought that Those competitors are not liable to equaliza­ the activity of remelting pig iron was to be tion, either because they are outside the regarded as similar to production — and it is jurisdiction of the ECSC or because they doubtful whether it is, — paragraph (b) of have been exempted by the defendant. Annex II would have to be understood as an When the High Authority is called upon to exception which is to be strictly interpreted. evaluate competitive situations it must do so On the other hand, foundries engaged in in concreto and not in abstracto. From this pre-melt engage in an activity comparable to standpoint exception must be taken to the that of the iron and steel industry. The criterion applied for the purpose of granting applicant's price-lists show, moreover, that or refusing exemption, namely that the it also offers foundry pig iron for sale. plant, manufacturing processes and raw It is true that the Treaty does not attach im­ materials must be identical. This principle portance expressis verbis to the plant used. leads to discrimination, especially when the But it is nevertheless significant that the defendant refuses to acknowledge the authors believed that they must exclude ex­ similarity of the respective situations of pressly small and medium-sized independent different undertakings whose products com­ steel foundries. pete with each other and which also use Second complaint: infringement of Articles scrap. 2, 3, 4 and 5 of the Treaty and of general The defendant cannot claim that it is not

engaged in pre-melt amounted in 1956 to applied to the other case. only 1% of all the scrap bought by Com­ (b) Competition from manufacturers of munity undertakings. Therefore the basis tubes of asbestos cement, concrete and for assessment of the equalization would plastic have been amended only to a much smaller extent than resulted from the exemptions Pig iron is dearer than, for example, which were in fact granted. asbestos cement; consequently, pig iron's share of the market in piping can only be 2. Specific arguments reduced by an artificial increase in produc­ tion costs. Moreover, this is what has (a) Competition of foundries engaged in melt happened since the introduction of the equalization scheme. The applicant does not accept the defen­ Competition from asbestos cement and so dant's affirmation that the applicant is in a on, to which foundries engaged in pre-melt more advantageous situation than foundries are exposed, represents a greater danger engaged in melt and that the requested ex­ than the competition from independent steel emption would place it in a more favourable foundries to which integrated steel foundries position compared with the latter. are exposed, at least during the period when In this connexion it points out in particular there was a steel boom which caused a shor­ that: tage of scrap. The construction of a blast furnace requires (c) Competition from steel foundries more capital investment than the installa­ tion of a cupola furnace; consequently, the The applicant calls attention to the fact that costs per metric ton of pig iron are higher in its blast furnaces are smaller than those of the case of foundries engaged in pre-melt steel industries which have an integrated and the latter are more vulnerable if prices fall. steel foundry capacity. It cannot therefore Although it is true that when the common derive any benefit, as the latter can, from market was established foundries engaged in any fall in production costs. Furthermore, pre-melt had an advantage over foundries the applicant's situation depends entirely on engaged in melt, that advantage was not ar­ the economic situation on the market for tificial but was due to greater productivity; castings. the advantage has in fact been reduced to a It must be borne in mind that a metric ton

ities result from partial integration, the in­ more expensive than those utilized by the tention of the authors of the Treaty as ex­ applicant; moreover, the applicant does not pressed in the provisions of Article 67 must have to bear the costs of the second smelting be ascertained (even though they only refer process. to the consequences of intervention by the Finally, it emerges from the applicant's ex­ States; examination of those provisions will planations that foundries engaged in melt show that only appreciable repercussions on are principally concerned with castings competition are to be taken into account. other than piping, whereas the applicant's In the case of steel foundries the High production consists mainly of the latter. As Authority has not merely recorded that 'at a for other castings, the application reveals given time raw materials, processes and that to all intents and purposes the two products are identical'; the fact is that 'in types of foundry do not compete. one particular case it deduced from that fact 2 (b) (Competition from manufacturers of that production costs were comparable and tubes of asbestos cement etc.) that there was consequently an appreciable repercussion on the competitive situation. The defendant admits that the applicant's With regard to the scope of Article 3(g), the products may be exposed to competition from defendant points out in its rejoinder that products made of asbestos cement and so on. this paragraph represents one of the objec­ However, in the absence of the equalization tives set out in Article 3 which the High scheme the cost of scrap would be still Authority must harmonize. higher and the situation of the applicant vis- As to the applicant's situation, the defen­ à-vis its competitors even more difficult. In dant partly admits the existence of the com­ relation to manufacturers of piping made petition claimed. But it states that the appli­ from substitute materials equalization is not cant's situation has not been affected more therefore a burden.

Grounds of judgment

Admissibility

The defendant doubts whether the letter at issue is a decision; in particular it calls attention to the fact that it is not 'an enforceable decision, such as is usually adopted following a refusal to discharge a pecuniary obligation'; nevertheless, it leaves this question of admissibility 'to be determined by the Court'.

In the applicant's view there can be no doubt that the letter at issue stating that the applicant has to pay amounts which in its opinion it does not owe is a decision.

The disputed letter was in reply to a letter of the applicant company of 19 April 1957 to the High Authority in which the applicant requested the latter to exempt from the levy relating to the equalization of ferrous scrap the molten pig iron which it produces in its blast furnaces and immediately transforms into pig iron castings. The revelant passage of the disputed letter is the sentence which reads as follows:

'Consequently, the High Authority does not see its way to granting your request for exemption from the scrap equalization levy.'

This decision is individual in character and concerns the applicant.

Therefore the application is admissible.

Substance

First complaint: infringement of Articles 53, 80 and 81 and also of Annexes I and II to the ECSC Treaty.

The applicant submits in the first place that at its works at Pont-à-Mousson the scrap used in the making of molten pig iron intended for the production of pre-melt castings must immediately be exempted from equalization because, in so far as the applicant prepares such pig iron, it is not an undertaking within the meaning of Ar­ ticles 80 and 81 of the Treaty.

It is true that under the abovementioned provisions only undertakings engaged in production in the coal or the steel industry are governed by the rules of the Treaty and that the expressions 'coal' and 'steel' only cover those products listed in Annex I, according to paragraph (1) of the said Annex.

The applicant answers this question in the negative and asserts that 'fonte brute' ('pig iron') is solely intended to describe solid pig iron; the defendant does not accept this assertion.

It is an established fact that the word 'brut', both in its ordinary meaning and more particularly in its meaning in iron and steel terminology, is intended to denote a material in the crude state which has not, in other words, yet undergone any trans­ formation.

Although it is true that the process for producing pig iron in a blast furnace, in par­ ticular from iron ores and coke, involves the primary transformation of those raw materials, it is equally true that it is only after the completion of that process that the material commonly known as 'pig iron' appears for the first time. Pig iron in the state in which it leaves the blast furnace and as long as it has not undergone further transformation other than simple solidification must therefore be 'crude' pig iron.

This finding is confirmed by the fact that in the language used in the trade 'fonte brute' ('pig iron') is in particular contrasted with 'fonte moulée' ('cast iron'), that is to say with pig iron as the material out of which those products called 'moulages de fonte' ('iron castings') are made.

The foregoing shows that the word 'brut' is intended to indicate a distinction quite different from that which can be drawn can be between molten and solid material.

In the case of pig iron it includes the material in the state in which it leaves the blast furnace, whether it has solidified or not.

The only question therefore is whether the authors of the Treaty intended to give the word 'production' a more limited application in law.

1. Such a limitation could first of all stem from the argument that under the system of the Treaty 'production' within the meaning of the Treaty and in particular of Article 80 consists solely in the manufacture of goods for marketing.

At first sight this argument appears to be supported by Article 1 of the Treaty, which states that the Community is 'founded upon a common market'. In fact the only conclusion which it appears possible to draw from this is that, in order to delimit the jurisdiction of the Community the Treaty applies only to products which are in a fit state to be marketed.

Nevertheless the general plan of Annex I shows that the abovementioned argu­ ment would be in contradiction with the Treaty.

The fact is that that Annex includes a very large number of products — for example 'Pig iron for steelmaking', 'Liquid steel cast or not cast into ingots', 'Hot finished products of.. . steel', and so on—which are known to be frequently, if not nor­ mally, first manufactured and then transformed, in factories or works which are separate but disposed of under the same business name, into products which are technically or economically different and which are not therefore offered for sale on the market.

Accordingly the argument in question would lead to the exclusion from the jurisdic­ tion of the Treaty of a large if not preponderant part of the production of the goods listed in Annex I, which would clearly be contrary to the intention of the authors of those provisions.

Nevertheless, these considerations alone are not sufficient to settle the problem at issue.

For this purpose it is above all necessary to take into consideration the fact that the authors of Annex I included in the list of products covered by the ECSC the category 'Foundry and other pig iron', without excluding from the jurisdiction of the Treaty foundries engaged in pre-melt, whereas other industries were expressly excluded.

There appears, therefore, to be no doubt that the authors of the said Annex I in­ tended foundries engaged in pre-melt to be subject to the system of the Treaty in so far as they produce molten foundry pig iron, since the latter, as has been deter­ mined above, belongs to the category of pig iron referred to under reference No 4200 of Annex I.

Although such a result implies that an intermediate and even in a way short-lived product is governed by Community law, it does not appear to be in any way con­ trary to common sense or to the basic principles of the Treaty.

It must in fact be borne in mind that, although the authors of the Treaty adopted the criterion of production for the purpose of delimiting the latter's field of applica­ tion ratione personae, they were none the less aware of the fact that, to a great ex­ tent, the producers of one Community product are at one and the same time con­ sumers of another product, steel producers for instance being at the same time con­ sumers of coal.

The advantage of this dual role occupied by certain producers was that they could

The discrimination alleged, as well as the other complaints made by the applicant, do not stem from a decision of the High Authority which is individual in character but arise out of Decision No 2/57 adopted, as provided for in Article 53 of the Treaty, with the unanimous assent of the Council.

In these circumstances it is advisable to ascertain whether the High Authority, without contravening the said decision and without exceeding its own powers, could grant the exemption which the applicant requested, in view of the fact that Decision No 2/57 had provided for exemption only in the case of integrated steel foundries and not in that of foundries engaged in pre-melt.

This question — which relates both to the difference in the scope and effect of general decisions, on the one hand, and subsequent individual implementing deci­ sions, on the other, and also to the separation between the powers vested in the High Authority alone and those vested jointly in the High Authority and the Coun­ cil — must be considered by the Court on its own initiative, even though it has not been raised by the defendant.

JUDGMENT OF 17. 12. 1959 -CASE 14/59

In its second submission, the applicant could have attacked the individual decision affecting it adopted by the High Authority only by pleading that Decision No 2/57 was illegal.

In fact it is general Decision No 2/57, rather than the individual decision, which the applicant could claim had infringed its rights by ostensibly discriminating against it in comparison with competing industries, especially integrated steel foundries, or else by creating a financial charge adversely affecting it.

1. The complaints as to discrimination and infringement of the right of all con­ sumers to equal access to sources of production

The applicant claims that the defendant practised discrimination, which is for-

PONT-À-MOUSSON v HIGH AUTHORITY

bidden by the Treaty, and failed to fulfil the obligation specified in Article 3(b) of the Treaty, namely to 'ensure that all comparable placed consumers in the com­ mon market have equal access to the sources of production'.

Both these complaints — the second of which also refers to discrimination in the broadest sense — have the same effect. In each case the applicant accuses the defen­ dant of not having placed it in the same situation as its competitors which do not have to pay the equalization contribution and of having thus made access to scrap a greater financial burden for it than for its competitors.

Discrimination consisting of the dissimilar treatment of comparable situations presupposes that there is a duty to treat all interested parties on the same footing and the possibility of so doing. In this case the High Authority could only dis­ criminate in the manner alleged by the applicant if it was empowered and bound either to make the latter's competitors subject to equalization or to exempt the applicant therefrom.

In fact, on the one hand, the fact that such exemption was illegal would not justify the grant of a similar exemption to foundries engaged in pre-melt.

JUDGMENT OF 17. 12. 1959 —CASE 14/59

On the other hand, the fact that the said exemption was lawful would not of itself make it obligatory to grant the applicant a similar exemption, since the latter's situation in relation to foundries engaged in melt is not comparable to that of in­ tegrated steel foundries in relation to independent steel foundries.

The High Authority justified exemption in the case of integrated steel foundries on the ground that the production plant and raw materials used by such foundries, on the one hand, and by independent steel foundries, on the other, are the same. There is no such similarity between the applicant, which is both a producer and consumer of pig iron, and foundries engaged in melt, which do not produce pig iron but mere­ ly consume it.

For this reason foundries engaged in melt are indirectly subject to equalization in so far as they use pig iron made from scrap on which equalization has had to be paid. Consequently, to exempt the applicant, far from merely placing it on the same footing as foundries engaged in melt, would give it an advantage compared with the latter, since it would enable the applicant to produce castings the production costs of which would not bear the burden of equalization in any way whatsoever.

On the other hand, a similar situation does not exist in the relationship between in­ tegrated and independent steel foundries.

PONT-À-MOUSSON v HIGH AUTHORITY

they indicate that the High Authority would exceed the limits of its powers if it adversely affected that situation more seriously than was established to be necessary after a thorough examination of the interests involved or, in any event, if it had a substantial adverse effect on that position; but, on the other hand, as the Court also held in the abovementioned judgment (loc. cit., p. 187), to claim that the com­ petitive position of an undertaking must not be changed at all by an intervention by the High Authority would amount to 'an unreasonable stipulation'.

(a) Having regard to the abovementioned principles it is appropriate to consider first of all whether, as a result of the decision at issue and the general decisions upon which it is based, the applicant's competitive position has been adversely affected to a substantial degree. This would only be the case if it were established that by reason of these decisions, the effects of which the applicant has been in a position to assess for several years, the competitive position of the applicant had in fact substantially worsened, for example, if the total volume of its sales had noticeably fallen; but, on the other hand, it is not sufficient that, following the in­ tervention of the High Authority, certain distortions of the respective cost prices of the applicant and its competitors had occurred.

The applicant, in order to persuade the Court to acknowledge that its competitive position has been adversely affected to a substantial degree in accordance with the preceding arguments, merely submitted and offered to prove in its application that the share of 'pig iron' in the piping market — compared with that of asbestos cement — 'has in fact fallen since the introduction of equalization'.

The answer to this question could be in the affirmative only if it were to be shown that the High Authority could have exempted the applicant from equalization without jeopardizing the functioning of that scheme.

Even if it were true that the exemption of the applicant, considered in isolation, would not seriously interfere with the equalization arrangements, having regard to the very small amount of scrap which it consumes, this fact would not be con­ clusive. In effect, exemption of the applicant would inevitably lead not only to the exemption of all other foundries in the Community engaged in pre-melt but also to valid applications for exemption by other undertakings which consume only a relatively small amount of scrap. As a result the proper functioning of the equaliza­ tion scheme would be appreciably threatened.

Consequently, the measures at issue go no further than their aim and purpose re- quire.

It is clear from the foregoing that the complaint as to the adverse effect on the com­ petitive situation must be dismissed.

3. The complaint as to a special charge

The applicant also claims that the decision at issue rendered it liable to pay a prohibited special charge.

It must therefore bear the costs of the proceedings.

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties; Upon hearing the opinion of the Advocate General; Having regard to Articles 3, 4, 5, 15, 31, 33, 53, 80 and 81 of the Treaty es­ tablishing the European Coal and Steel Community and also to Annex I to the said 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, especially Articles 29(3) and 60(1),

THE COURT

hereby:

1. Dismisses the application as unfounded.

2. Orders the applicant to bear the costs.

Mr President, Members of the Court, 'coal' and 'steel'. It is a real problem of delimitation which is submitted to you, the In this case you have to contend for the first legal and economic aspects of which are to a time with Annex I to the Treaty which great extent permeated if not dominated by relates to the definition of the expressions highly technical considerations. 1 —Translated from the French.