C-2/65

JUDGMENT OF THE COURT 30 JUNE 19661

Ferriera Ernesto Preo e Figli v High Authority of the European Coal and Steel Community

Case 2/65

Summary

Common financial arrangements — Equalization of ferrous scrap — Calculation of con­ tributions — Account taken by the High Authority of re-use of arisings offerrous scrap — Average percentage of such arisings adopted for calculation — Precise information essential (ECSC Treaty, Article 53)

When it fixes the pecuniary obligations of ance of the arisings of ferrous scrap; a mere an undertaking assessable under the scheme mention that account has been taken of for the equalization of ferrous scrap, the such arisings is insufficient. The lack of this High Authority must show—and indeed information constitutes a serious hindrance give a statement of reasons for—the average to the adequate defence of the undertakings percentage adopted in the case in question concerned and the necessary review by the for the purpose of calculating the signific­ Court.

Application for the annulment of two individual decisions of the High Authority of 13 November 1964 relating to the payment of the contributions to the scheme for the equalization of imported ferrous scrap and scrap treated as such,

1 — Language of the Case: Italian.

JUDGMENT OF 30. 6. 1966 — CASE 2/65

THE COURT

composed of: Ch. L. Hammes, President, A. M. Donner (Rapporteur), A. Tra­ bucchi, R. Lecourt and R. Monaco, Judges,

Advocate-General: J. Gand

I — Facts and of the positive differences (981 metric tons) between the initial stock The applicant is a partnership whose part­ and the final stock, ners are the four brothers Preo. — the difference between the ferrous scrap The applicant's electric furnace, which has received, that is to say 13 956 metric a capacity of 6 to 8 metric tons of cold tons, and the purchased scrap declared charge, commenced steel production on 1 (12 431 metric tons) was fixed at 1 525 October 1956. metric tons. In order to check the tonnages of ferrous At the request of the Director of the Market scrap used for this production and liable to Division, the applicant accepted these fig­ equalization, the Société Anonyme Fidu­ ures by letter of 18 July 1959. ciaire Suisse (hereinafter referred to as The second inspection, covering the entire SAFS) carried out two checks on the appli­ period from 1 October 1956 to 30 November cant undertaking: the first in September 1958 gave, according to the communication 1958 (for the period from 1 October 1956 to of the Market Directorate of the Director­ 31 December 1957), the second in February ate-General for Steel, dated 8 January 1963, 1961 (for the whole period from the com­ the following result: mencement of operation of the furnace until the termination of the equalization scheme — on the basis of the consumption of 850 on 30 November 1958). Kwh of electricity for the production of The first inspection (according to the annex one metric ton of liquid steel, to a communication addressed on 6 July — on the basis of a ratio of 1.015:1 between 1959 to the applicant by the Director of the the total charge and the production of Market Division of the High Authority) liquid steel (specific input), gave the following result: — without continuing to take account of — on the basis of the consumption of 1100 either the ratio between the tonnage of Kwh of electricity for the production of the charge of ferrous scrap and that of one metric ton of liquid steel, the total charge, or of the own resources — on the basis of a ratio of 1.1:1 between notified (thus expressly excluding the the total charge and the production of arisings of ferrous scrap from the calcu­ liquid steel (specific input), lation), or of the difference between the — on the basis of a ratio of 0.95:1 between initial stock and the final stock, the tonnage of the charge of ferrous — the difference established between the scrap and the total charge, four quantities of assessable ferrous — taking account of 2 555 metric tons of scrap and of ferrous scrap declared was own resources, notified by the Ferriera, 10 734 metric tons, which increased the

debt, principal and interest, as at 31 May the training of a qualified and special 1964, to 58 641,455 lire. ized labour force? On 8 April 1963 the Market Directorate of (4) Is it true that in October 1958 produc the Directorate-General for Steel, notified tion of special steels (for motor vehicle the applicant that, taking into account the springs and carbon steels) commenced contributions already paid by it, it remained and that this production was declared, liable to a balance of 55 576 196 lire; sub as it progressed, to the ECSC and sequently, this figure was amended to amounted in all, up to June 1960, to 55 700 153 lire. 2 032 metric tons; and that to obtain By letter of 6 May 1963, the applicant that special production there were re declared that it did not admit this debt. quired several months of trials with un On 13 November 1964, the High Authority happy results and an excessive con adopted the two contested decisions; the sumption of electricity as a consequence first fixes the applicant's assessment to of castings which were either too long or equalization contributions at 34 058 metric spoiled and in the latter instance had tons for the period from 1 October 1956 to later to be returned to the furnace? 30 November 1958, and the second obliges (5) Is it true that the excessive consumption it to pay in this connexion a sum of of electricity led Preo e Figli in particu 55 700 153 lire as equalization levy. lar to use iron turnings, light scrap and American baled scrap, that the latter in II — Conclusions of the parties particular constituted the major part of the supplies obtained by Preo e Figli in In its initial application, the applicant third countries and as they contain claims that the Court should: many impurities amongst which in — annul the contested decisions having particular are chrome and nickel, does previously ordered that their application the necessary deoxidization require a longer period in the furnace?

numerous errors were committed caus III — Submissions and arguments ing various difficulties as a result of of the parties which many castings were unsuccessful, so that the materials had to be returned The applicant contests neither the structure to the furnace involving a considerable and functioning of the equalization scheme, increase in the consumption of electric nor the High Authority's right to make an ity? estimated assessment of the contributions if (3) Is it true that the instruction and re sufficient documents are not furnished by training of the work force was very long the undertaking concerned. and difficult; that these periods lasted But it emphasizes that it has a special case, even longer owing to the continual in the first place for technical reasons which turnover in workers under a group it explains in the third submission, and in employment scheme, and that this the second place because two successive turnover constituted and at present assessments were made on it which did not still constitutes the major obstacle to merely contradict each other, but the second

of which amended the first without any of assessment, thus rendering invalid an change in the facts of the case having been assessment accepted by the undertaking either proved or alleged. liable. In this way, freedom of will is de As the first assessment was accepted by the prived of all meaning, even in the special but applicant, the defendant is bound by agree precise sense which prevails in the field of ment. public law (for example, for a national In support of its application the applicant fiscal body). relies on the following submissions: In its reply, the applicant cites the grounds relied on by the defendant in its statement of A — Infringement of Article 3 of Decision defence to justify altering the criteria: No 22/54 of 26 March 1954, establish "The first calculations were not completely ing a financial arrangement for the satisfactory as they were exceeded by the equalization offerrous scrap imported calculations carried out on the basis of the from third countries, and of Article 5 of criteria adopted by the committee of ex the Treaty perts created subsequently and which were better suited for the purposes of making the The applicant relies on Article 3 of Decision assessment.' No 22/54 of the High Authority whereby According to the applicant, these grounds 'the amount of the contributions shall be are not such as to justify unilaterally calculated in proportion to the tonnage of changing the assessments already made, ferrous scrap purchased', and on Article 5 with which it agreed. of the Treaty which provides that the insti It argues moreover that the 'agreement', tutions of the Community shall carry out which was arrived at following the first their activities 'in close cooperation with the assessment, must also prevail for the later parties concerned'. period, from 1 January to 30 November In contravention of these provisions, the 1958. defendant fixed the basis of assessment to The defendant replies that Decision No contribution in the case of the applicant on 22/54, relied upon by the applicant, was the basis of a theoretical criterion which did only in force until 31 March 1955; at this not take account of the facts of its particular date the applicant undertaking was not yet case, without moreover affording it an ac

Al for the High Authority to establish that the though it is true that Article 5 of the Treaty facts of the case have changed and that con gives rise to an obligation on the part of the sequently a new assessment is justified. defendant to cooperate with the under In the present case, it is the criteria not the takings, this obligation must be reciprocal facts of the case which have changed. Ac and assumes cooperation on the part of the cording to the applicant, it is inadmissible undertaking. In the present case, the appli and illegal retroactively to alter the criteria cant's letter of 6 May 1963 was limited to

takings. It is precisely for this reason that it Consequently, as no fault can be alleged is impossible to admit special cases. against the applicant, the very basis for the estimated assessment falls. On the other The defendant refers to the case-law of the hand the decision must be based on the Court, alleging that it is charged with the particular facts which the SAFS itself task of improving and perfecting the equal­ checked and assessed at the time of its first ization scheme, and that, in order to avoid inspection. As the defendant itself has differences and discriminations amongst maintained on various occasions before the the undertakings, it is entitled to found its Court, the consumption of electricity may estimated assessment on new criteria arising be one factor among many for fixing the from the opinion of the committee of ex­ consumption of ferrous scrap. According to perts. the applicant, it cannot constitute the sole The defendant describes as absurd and criterion for justifying (of itself) an alter­ erroneous the argument of the applicant ation of the assessment previously carried that the 'agreement' could be extended to out, in the same premises, by specialists the period following the first 'assessment', appointed for this purpose by the defendant thus giving rise to a kind of abstract and itself. perpetual res judicata in favour of the ap­ The first assessment was moreover accom­ plicant. panied by a statement of reasons identical to In its reply, the applicant asks who the the second, namely the absence of any members of the 'committee of experts' are, documents. Consequently it is unacceptable the authors of the new criterion, in what that the same ground should be relied on fields they are expert, who appointed them, twice, but for different purposes: first for what their tasks are, what problems were the inductive assessment, secondly for brought before them, and how they replied altering that assessment. to them. The defendant objects that the applicant The defendant maintains that the Court must have, apart from the documents itself has recognized the competence of this relating to the consumption of electricity, committee in technical matters (Case No a minimum administrative organization 18/62). which it has failed to put at the disposal of It has annexed to its rejoinder the notes ot the appropriate departments of the defend­ the meeting of the committee of experts of ant. The consequence, and not, as the ap­ 13 February 1962. plicant thinks, the penalty, was an inductive

assessment: cuius commoda, eius incom­ contrary, there would have been a misuse of moda. The defendant alleges moreover that powers if the High Authority had acted the contested decisions were accompanied otherwise, that is to say, if it had applied to by full statements of the reasons of law and the applicant criteria other than those ap­ of fact upon which they were based. plied to all Community undertakings. With regard to evidence by witnesses, re­ C — Abuse (misuse) ofpowers by reason of quested by the applicant, the defendant erroneous criteria and renunciation of emphasizes that the committee of experts the first assessment, which is all the certainly did not fail to take account of the more serious and requires relevant and fact that a commissioning period is also convincing grounds since the assess­ necessary for furnaces, that certain mistakes ment was accepted by the undertaking were made and that the workers might have —complete failure to state reasons been better. It took account of the difficul­ ties of production. Consequently the appli­ The applicant contests the criteria on which cant does not appear to it to have been less the second assessment is founded. It main­ favourably treated than the other under­ tains that the alteration of the criteria ac­ takings. cepted at the time of the first assessment testifies either to a series of errors which it IV — Procedure was desirable to correct, or to a contra­ diction which was arbitrary, and according The application was lodged at the Court to it, inadmissible. Registry on 15 January 1965. It observes that account must be taken of By separate document, lodged at the Reg­ the fact that there was a commissioning istry on 25 January 1965, the applicant made period for its furnace, that there were nu­ an application to suspend the two decisions merous technical mistakes during that contested in the main application. period and that the training of its workers The application for adoption of this interim entailed a low output for many months. measure was dismissed by Order of the Consequently, its consumption of electricity President of the Court on 12 February 1965. exceeded what was normal for a comparable The written procedure followed the normal undertaking. The SAFS took account of course.

FERRIERA ERNESTO PREO v HIGH AUTHORITY

At the hearing on 19 January 1966 the because of this, it was unnecessary for the Advocate-General delivered his opinion experts to consider whether the ferrous that the application was unfounded and scrap with which the furnace was charged should be dismissed. was composed only of bought material, or By Order of 16 February 1966, the Court whether it also included own arisings orig­ requested the defendant to supply additional inating from previous production cycles, explanations with regard to the scope of the and therefore they have not made this dis­ experts' opinion on which it founded its tinction. estimated basis of assessment to contribu­ As to (b): As appears from the marginal tion in terms of the consumption of electri­ notes to the graph drawn up by the experts city. during their abovementioned meeting, with The questions put by the Court were drawn regard to threshold values, it should be up as follows: noted that the following statement was (a) In adopting the approved criteria, did made: the experts take account of normal re­ 'Cases outside these values are exceptional use of own arisings relating to each and require special justification.' production cycle in subsequent produc­ A higher consumption for commissioning tion cycles? thus comes precisely within these exception­ (b) Are the approved criteria applicable to al cases, and the experts therefore did not the 15 months after a furnace has com­ give particular consideration to the com­ menced operations, in an undertaking missioning period. It should in addition be which has just begun its production? considered that the parameters were fixed The replies supplied by the defendant, rather high, in order to take into consider­ which were lodged at the Registry on 29 ation all the difficulties which might be en­ May 1966, were as follows: countered in the normal production of As to (a): The consumption of units of steel. electricity, fixed for the different furnace capacities, depends on the input of ferrous By letter of 6 June 1966, the applicant sub­ scrap, and it is of little importance whether mitted its observations with regard to the the latter is composed of own arisings or of abovementioned replies. bought scrap;

The applicant further complains that the statements of reasons for the contested decisions give no information as to the weight attached by the High Authority to the re-use of arisings of ferrous scrap. In fact it emerges, according to the applicant, both from the statements of reasons and from the documents produced, that neither in calculating by way of extrapolation the quantities of steel produced by reference to the criterion of electricity consumed, nor in establishing the ratio between the charge of ferrous scrap and the steel produced, did the High Authority take account of this factor, although it was essential in fixing the basis of assess­ ment to levy.

The defendant replies to this allegation by referring to the tenth recital in the preamble to the contested decision, which provides that 'the ratio between a specified charge of ferrous scrap and the steel produced may be assessed at 1.015 kg., taking account of recycling in the rolling mill', and says that it is apparent from the last six words quoted that it has in fact taken account of this factor in its calculations.

Even on the assumption that the said quotation bore the meaning attributed to it by the defendant, it does not constitute a statement of reasons, sufficient in law, for the assessment. Since arisings often represent a considerable percentage of the ferrous scrap with which the furnace is charged, it is not sufficient to show that account has been taken of them. It is essential to indicate, and indeed to give a statement of reasons for, the average percentage adopted in the case in question for the purpose of calculating their significance. The lack of this information (which moreover appears easy to supply) constitutes a serious hindrance to an adequate defence of the undertakings concerned and the necessary review by the Court.

the application for the adoption of an interim measure were reserved for the final judgment. Since its application for suspension has been ruled inadmissible, the applicant must be ordered to pay the costs thereof.

On those grounds,

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 the Treaty establishing the European Coal and Steel Community, especially Article 33; Having regard to Decisions Nos 2/57 and 13/58 of the High Authority of the European Coal and Steel Community; 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 Communities, especially Article 69 (2);

THE COURT

hereby:

1. Annuls the individual decisions of the High Authority of the European Coal and Steel Community of 13 November 1964 relating to the payment of contributions to the scheme for the equalization of imported ferrous scrap and scrap treated as such;

Registrar President