C-3/65

JUDGMENT OF THE COURT <ap note>1</ap note> 15 DECEMBER 1965

Société Anonyme Métallurgique d'Espérance-Longdoz <ap note>2</ap note> v High Authority of the ECSC­

Case 3/65

Summary

1. Common financial arrangements — Equalization — Contributions — Exemptions

— Principles (ECSC Treaty, Article 53)

per functioning of such a scheme, contributions which depends not on

in particular the principle of the the way in which an undertaking equal liability of all those affected arranges its production but on the

to pay contributions shared in pro­ contractual relationships which it has portion to the amounts respectively with other undertakings is not com­

consumed, and the requirement that patible with the equalization scheme.

the scheme foe applied impartially to Classification of scrap as 'own it. is depend­ all those resources'

subject to not necessarily No exemption from equalization con­ ent on the concept of ownership of

JUDGMENT OF 15. 12. 1965 — CASE 3/65

Willy- service in Luxembourg at the chambers of Ernest Arendt, 6 rue

Goergen,

applicant,

v

HIGH AUTHORITY OF THE EUROPEAN COAL AND STEEL COMMUNITY, represented by its Legal Adviser, Giuseppe Marchesini, acting as Agent, assisted by Cyr Cambier, Advocate at the Cour d'Appel, Brussels, with an address for service in Luxembourg at its offices, 2 place de Metz,

composed Hammes, President, L. Delvaux and W. Strauß of: Ch. L.

(Rapporteur), of Chambers, A. M. Dormer, A. Trabucchi, R. Presidents Lecourt and R. Monaco, Judges,

Advocate-Gneral: K. Roemer Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

bars) 'is based on the assumption Rochette'), the object of which was the

that Phenix-Works will supply delivery toy the applicant of coils, Espérance-Longdoz with a quantity heavy plate and hot rolling mill cast-

of ferrous scrap equal to 25% of offs for re-rolling; in particular, the

the monthly tonnage of sheet bars applicant wrote the following in its

and, for the coils, a percentage, to confirmatory order to La Rochette. be determined by mutual consent from the ... scrap arising processing when the contract has been in of our steel shall remain our entirely operation for six months, of the property. In this the matter, quantity tonnage scrap has been fixed at monthly of coils supplied of of the ...% Espérance-Longdoz'

by (this per­ material delivered to you. It is under­

following clause: assessable to contribution.

Neither party wishing to alter its view, As agreed, we transfer to you only such the applicant put his case in an initial material as is required for your finished application (No 24/63) which was product, and retain ownership of the declared inadmissible by a judgment of scrap arising from your processing.'

the Court of 5 December 1963. (b) A new contract dated 6 September 3. By a decision of 13 November 1964 1956 was substituted for the above- 21 December communicated on 1964, mentioned contract by the applicant he defendant rejected the applicant's and Phenix, providing that, with effect proposition and demanded payment by from 1 January 1956: it of the sum of BF 12 608 323; accord­ defen­ —

the applicant undertook to supply ing to the grounds given by the Phenix with coils for re-rolling; dant this sum represents the difference between — since the applicant 'wishes to retain

BF 17 587 340 scrap arising from equaliza­ of the — the sum of ownership tion the in the processing by Phenix ... of the contribution on scrap coils supplied, Phenix ... undertakes question; to deliver to [it] each month ... a — the sums of BF 1 455 434 and tit tonnage of scrap fixed at a standard 3 523 583 payable to the applicant

rate of 10% ... of the weight of under the equalization scheme and

(c) During the year 1957, the applicant 4. On 19 January 1965, the applicant

made a series of contracts by corres- filed the present action.

JUDGMENT OF 15. 12. 1965 — CASE 3/65

II —

Conclusions of the contributions were chargeable on

parties scrap recovered;

cant the capital sum of BF 6 998 000 'B In for damages. — the application by way of damages, subject to adjust­ ... in so far as it decides to reject the ment either way during the course of application for annulment, the proceedings; — in the first place, in both instances, the capital sum to be order the High Authority to pay the augmented by the same penal interest applicant the capital sum of BF as that requested by the High Authority 17 587 340 by way of damages; from the applicant for the equalization — as a subsidiary matter, order the contribution;

the further that before judg­ High Authority to pay the applicant request, is be the capital sum of BF 6 998 000 by ment given one or three experts way of damages: appointed to make a report to the

Court which report shall: in both cases the capital sum to be increased by the same or com­

(1) Define the influence that the scrap .penal

equalization or at least pensatory interest as the High contribution, the knowledge that there is 'liability Authority requested the applicant to

to pay contributions on the scrap in pay for its equalization contributions, have on or at least increased by penal or question, would normally the financial and technical condi­ compensatory interest at 5.5% or at such other rate and from such date tions in the supply contracts made

ESPÉRANCE-LONGDOZ v HIGH AUTHORITY

(1) to say whether technically within These conclusions were repeated by the the terms of the contract made be­ defendant in its rejoinder.

tween it and Phenix-Works the appli­ cant could have undertaken the

pickling of coils in its own works III — Submissions and

and to say what amount of the arguments of the

contribution would have been saved parties

into account in fixing the contract 1. First ground: infringement of the price between the applicant and basic decisions Phenix-Works and La Rochette; any other tasks the Court The con­ and applicant states that at no 'time

siders it advisable to entrust to did the scrap in question 'belong to

them concerning the damage actually By making it sub­ another undertaking.

incurred and its extent; ject to payment of equalization con­

in­ — as a wholly subsidiary matter, tributions, therefore, the defendant prior to giving judgment, authorize fringed the basic decisions, according to the applicant to prove by any means which contributions are to be calculated open to it in law and particularly only on the 'basis of 'bought scrap.

by the witnesses that at the time of (a; the contested decision is wrong in

(2) Declare as to the main, subsidiary volving the return of a physical object'.

. and further subsidiary claims made Moreover, the mutual and apparent in­

in support of the action for damages tention of the .parties is for the appli­

that they are—following the appli­ cant to retain ownership of the arisings.

cation—inadmissible and unfoun­ A clause such as this precludes any ded­ ;

notion of sale or re-sale of the scrap'.

ownership clause, the buyer receives portion of one and the same thing is less than might appear at first sight'. impossible under Belgian law. "The

Next, the statement in the contested possibility of separate tide in the

decision to the effect that: constituent elements of an object

'the is neither a product nor a existing is in any case, in certain scrap by-product circumstances, generally admitted, as of the consumer undertak­

ing; it constitutes a by-product the com­ is shown by its many applications in mercial nature of which differs from connexion with rights in land leased

the original semi-finished and for building and other purposes product, this by-product is created in the course (droit de superficie), rights of user

case—a retention of ownership in tested decision to the effect that: unde­ respect of a constituent and 'the contracts in question are primarily concerned with the appli­ termined part of a thing is not valid guaranteeing in Belgian law, the rule would not cant a supply of scrap against a price be applicable here; for the scrap in to be fixed', dispute "cannot 'be considered to be is ineffective since the desire to ensure undeter­ a constituent element, of a supply can be reconciled 'just as easily mined quality and quantity, of the within the framework of a contract with thing delivered and in which separate retention of ownership as within that ownership cannot exist, since the of a supply contract'. purpose of the contract necessarily (b) The defendant is likewise mistaken entails separation of the and scrap, in contesting the validity in Belgian law this separation, far from destroying of the disputed clause. On this point, the substance of the thing delivered, the applicant's argument runs essentially is necessary to restore to that thing : as its own full value, while the reser­

'—While Article 546 of the Belgian vation relates to quality and quan­

determined" Civil Code, confirming the principle tities which are or at

of accession, declares that ownership least determinable. of an objective gives title also to what — The objection that separate owner­

is produced from the object and what determin­ ship of 'the separable and

is an integral part of it, the parties able element arises only at the

this theory, "separate ownership of tract'.

the scrap arises in the processing; The defendant states that both in the

when the bar is rolled, a new sheet contested decision and in the judgments

thing of a different nature is created, on which it relies the arguments based waste scrap . . . And this new thing on national law were considered to be is, from the its creation, moment of of secondary importance; it is primarily the property of him in whom the law from the point of view of Community or the will of the parties vests it". law that the questions in dispute must

—

The contested decision should not be settled.

ent from those which are present in the It cannot seriously be maintained that case of a jobbing contract. the percentages of scrap to be delivered This is because: are fixed independently of the actual

in fact —

the 'retention of ownership'

relates volume of waste scrap; the

figures quoted in the contracts were to a quantity scrap determined at of

fixed on the basis of past experience. a standard rate; if those percentages are not attained, the buyer of the Moreover, if Phenix or La Rochette undertook to deliver more than that sheet bars, coils etc. must relinquish

— it Has no bearing on the situation in — the applicant is mistaken in seeking hand, since the defendant does not to refute this argument by asserting require that the scrap returned to the that arisings are equally fungible in original works, under a jobbing con­ the case of jobbing contracts; the tract, be identical with the arisings defendant has in no way ignored the

JUDGMENT OF 15. 12. 1965 — CASE 3/65

aspect or substitution; but the com­ 2. Second ground: Lack of competence; parison has no relevance here, infringement of the first paragraph of (b) Proceeding to a detailed analysis of Article 5 and Article 83 of the ECSC Belgian law, the defendant endeavours Treaty to show that the disputed clauses are The applicant claims that the contested ineffective because they are incompatible decision goes beyond the bounds of the with the character of real (rights in rem). defendant's powers and fails to observe — It is futile for the applicant to lay emphasis on thelaw relating to ac­ the compulsory limitation on its powers of intervention by asserting that ac­

cession, to which there is no need de­ ceptance of national law as decisive: to resort in order to justify the 'would allow undertakings in certain fendant's theory. On the contrary, countries to control the application of as most Belgian authorities agree, 'it is not correct to say that the owner Community law in this field'. Since the has not yet archived of a thing acquires by accession the ECSC

full integration, however, the defendant product of that thing. The product is bound to have regard to differ­ of the thing is the property of the any ences existing between the national owner by virtue of his exercising his

sive right. This being so, there can­ Nor has the. defendant any grounds for Mem­ not be several persons possessed at claiming that, of the civil laws in the same time of .the right to use and ber States, priority should be accorded interpre­ enjoy a thing and to dispose of it, to those which give the widest

except in a case of tation to the concept of bought scrap. co-ownership, which does not concern us here; cf. The defendant replies that it would be

Article 544 of the Belgian Civil incompatible with the sense and pur­

Code. pose of the equalization scheme, char­

inter­ In the present case, the person ac­ acterized by the principles of

quiring the semi-finished products dependence and equality, to make the

In no case does the law permit a by fixing uniform criteria for charging separate right of ownership in parts the contributions.

of the whole which are not de­ The contested decision is in accordance

termined and which are indistinguish­ with the case-law of the Court, where able in substance from the single —It 'was held that it was necessary to whole have recourse to general principles

ESPÉRANCE-LONGDOZ v HIGH AUTHORITY

drawn from the laws of Member improvement in efficiency within the

States, provided that such principles firm itself'. were consistent with the requirements The disputed decision made some of

with; consequently, in the present Lastly, the applicant repeats here the

case, it is sufficient to find that there based ap­ argument on the regulations

has occurred some 'movement of plicable to work contracted out (cf. scrap between different undertakings', supra. I). and that the disputed arisings were (b) Furthermore, the contested decision the result of a productive process is in breach of the duties imposed on

carried out by a firm other than the the defendant by .paragraphs (a), (b) consumer firm. and (d) of Article 3 of the Treaty. In

Lastly, bearing in mind the two prin­ particular it infringes: ciples of res judicata and non-discrim­ —

paragraph (a), since it penalizes a

contributions while granting exemption me defendant has contra­ (C) Lastly,

to job­ scrap which, on completion of a vened Article 15. 'Bearing in mind the

bing contract, is returned to the person procedural phase completed before the

giving the order; this is a breach of Court of Justice (Joined Cases 23, 24 Article 4 (b). In fact the two situations and 52/63—Rec. 1963, p. 451 et seq.) are fully comparable so far as the pur­ and the fact that during this phase, as poses of the equalization scheme are as in prob­ well earlier approaches, the concerned, since in both cases: lem posed for the equalization scheme

— the recovered scrap is a by-product of assimilating scrap subject to a reten­

of the original semi-finished pro­ tion of ownership clause and scrap re­ duct; sulting from work contracted out was —

JUDGMENT OF 15. 12. 1965 — CASE 3/65

To point (a): ing to answer is precisely whether

This pan of the argument is inadmiss­ the grounds given by the decision ible, since the validity of an act cannot are 'genuine and worthy of considera­ be prejudiced 'by the existence of tion'.

grounds on which it was not based'. 4. Fourth ground: Illegality of the basic And it is not well founded either, since decisions concerning the equalization

the two procedures differ in both (1) scheme.

their legal; and (2) their economic as­ The applicant considers that even if it

ures of these two types of contract ional legal systems;

are reflected in their consequences — because they infringe Articles 3 and

and therefore in the parties'

econ­ 4 of the Treaty.

omic circumstances—if only because The defendant considers that its answers

the considerable variation in the risks to the second and third grounds apply involved equally to this complaint. . . .'.

On the question of admissibility, the single register . . . where scrap coming applicant replies: from Phenix-Works and La Rochette in large let­ — as to point that this part or the appears under a heading dis­ ters'

(the applicant produces photocopies argument, alleging unacceptable crimination, is a fundamental ground of extracts from the register). 'This be­ must, therefore, be ing ad­ of claim and so, one of two alternatives must apply' :

missible; — as to point (C), the objection is mere — Either this firm has railed to carry sophistry'; the question we are try- out its investigation in the proper man-

ESPÉRANCE-LONGDOZ v HIGH AUTHORITY

ner, in which case there has been Phenix-Works or La Rochette consider­

negligence for the de­ the serious which ably earlier'; same may 'be said a fendant is liable; fortiori of Decision No 13/58 pub­ — Or else—and this is the correct as­ lished in the Official Journal of 30 July sumption—it did its work properly, 1958. in which case it cannot have failed to —

was liable to mislead the applicant. clusion must be that the defendant has But the truth is that the applicant been negligent in that: 'was assurance'

given every at the —

during the first period, it failed to

time express official to any opinion, or

— The defendant is mistaken in refer­ alert the applicant to the presence

ring to the letter of 18 December 1957 of the difficulty; sent by it to the Joint Bureau of Fer­ —

covered jobbing under a contract—­ a complex and delicate problem'. that is, in a factory bearing a com­ The defendant disputes the allegation

pany name other than that of the of a wrongful act or omission, and that

consumer firm—was 'own resources'; the applicant have been misled; could

furthermore, this letter was essen­ the chronological order of events is de­

tially concerned with the problem of scribed and evaluated by it as folows:

group scrap, which does not concern When, in 1953 the Market Division —

semi-finished products delivered to position to do so. If they did pass

JUDGMENT OF 15. 12. 1965 — CASE 3/65

any comment, it could only have removal of discrimination between scrap been a purely personal one, for their consumers'; these principles have the

task was quite unambiguous: they sanction of judgments of the Court. were given no authority to draw any conclusions as to the legal signific­ 2. Injury and the causal link ance of the facts found by them. The applicant claims that, had it known Indeed, the difficulty was not even in time of 'the view now taken by the by What is raised'

these officials. defendant, it would have acted other­

be­ more, the second contract made in any case would have found wise and tween the applicant and Phenix was itself in a more favourable financial prior to the check carried out in situation. In this it considers context, 1956. 'The opinion the investi­ of that 'three possibilities must be con­

in favour of making the scrap in tract could only reasonably have been question subject to equalization . . contemplated for the pickling of the

either the applicant formulated its coils alone, and would have 'been out contract independently of any opinion of the question as regards the sup­

of the High Authority, or it must plies of sheet bars'. It is true there­

have realized that the scrap in ques­ fore that by itself this method of

tion was subject to equalization'. Or procedure could only have saved the

this last point, the defendant agrees applicant roughly a quarter of the

have constituted 'yet another warn­ finished product'. ing'. For these two possibilities, existing in

Lastly, the checks carried out by the combination together or with others, 'the defendant do not in any way amount injury sustained is represented by the

to an act which it is bound to perform full amount of the contribution with

in the interests of those liable to con­ which the applicant would not have tributions. Further, 'where there is a been burdened'; it thus amounts to

conflict between the interests of private BF 17 587 340. individuals and the general interest, the —

Or, finally, there is the lesser possi­

easily borne by either the company any case constitute a breach of Article funds or the profits, particularly since 60 of the Treaty'. the total sum would have been spread To the applicant' s affirmation that it

five financial have in years.'

over could accomplished the work

On the other hand, 'to have to pay this question by means of a jobbing con­

sum all at once . . . constitutes a burden tract, it may be objected that that .type . . . which .the firm is being made to of contract has a legal nature quite bear in . . . less favourable financial distinct from the contracts here under

circumstances; furthermore, had it consideration; the two types of contract

referred to, the applicant paid tax on obligation to pay its contribution all at

a higher level of profit. The burden of once, it misunderstands the system

this tax may be estimated at 34.5% — introduced by Decision No 7/61. It subject to adjustment—namely BF is true that by virtue of this, the later 4 350 000'. In the third instance, the a firm pays, the later it becomes entitled damage suffered therefore amounts to: to the benefit of credit interest; but it BF 2 648 000 + BF 4 350 000 = BF is to a great extent compensated for 6 998 000. this by the fact that meantime it has The applicant denies, and submits facts had it at its disposal the money which

in support of its denial, any suggestion it owed. which might lead to an admission that Lastly, as regards the changes deduct­

the retention of ownership clause was ible under the national fiscal provisions included in the relevant contracts for there appears to be no reason why the

the purpose of avoiding the equaliza­ entire amount of the contribution

C — The offer of evidence duly warned that the arisings were

subject to contributions, it would have 'As a further subsidiary point', the been able to charge prices augmented

applicant declares that it is willing 'to by the amount of the contributions, it

prove, by any means open to it in law, would be essential to know what prices

including the calling of experts and wit­ it actually charged its contractors. A

nesses, all the facts adduced by it and comparison between these prices, which in particular the existence and amount are not based on the contracts, and the of the damage', and it requests 'that prices prevailing in trade at the time experts be appointed for the purpose if might demolish the latest arguments

admissible'. 'In any event, as regards heard on 18 and 19 October 1965. the possibility mentioned by the The Advocate-General delivered his opposite party that once it had been opinion on 4 November 1965.

Grounds of judgment

I — The application for annulment

1. The first ground

The applicant claims that the scrap in dispute constituted not bought scrap

decisions, but 'own resources'

ESPÉRANCE-LONGDOZ v HIGH AUTHORITY

a regularsupply of scrap at uniform prices whatever the Member State to

which they belonged or the origin of the scrap in question.

These decisions, aimed at spreading between undertakings the financial burden of a benefit in which all could share, accordingly made all scrap con­

sumed by Community undertakings subject to the equalization levy, with the single exception of scrap which constituted their own resources.

The scope of this exemption can be determined only by reference to the system within which it is designed to operate and in the light of the funda­ mental principles on which it is based.

ignoring the fact that the concept of 'own depends equally resources'

on a

consideration of the method of scrap production required by the spirit and purpose of the equalization scheme. The applicant is therefore mistaken in

thinking that the exemption can be made to apply to the scrap here in dis­ pute simply by showing that at no time did it transfer its ownership thereof.

In doing so, it fails to appreciate that the fact that scrap arising from a trans­ fer of ownership was classified in previous similar cases as bought scrap does not by any means indicate that the absence of any transfer will justify exemption from the equalization levy.

Indeed, the question who holds tide to the ownership of the disputed scrap, however important, cannot be the sole determining factor in the equalization scheme.

Such re-utilization constitutes in fact an internal measure of economy con­

ducive to increased productivity; exemption of scrap so used does not there­

fore distort competition within the market.

On the otherhand any exemption which depends not on the way in which an undertaking arranges its production, but on the contractual relationships which it has with other undertakings, is not compatible with the scheme.

The classification of scrap as 'own resources'

is not therefore necessarily dependent on the concept of ownership of the scrap, but is intended to apply in the main to scrap which is genuinely the product of the undertaking's own

retained from the semi-finished products sold, but is a new product.

Consequently consumption of this scrap by the applicant cannot be considered as a re-utilization by the producer undertaking of its own resources.

ESPÉRANCE-LONGDOZ v HIGH AUTHORITY

In these circumstances, the scrap in question must be subject to the payment of equalization contributions, the affinities with private law invoked here by the applicant being irrelevant to the matter.

The determining factor lies not, therefore, as the applicant claims, simply in the physical transfer of the scrap, but in its incorporation into the cycle of

production of an undertaking which has had no part in the production process from which it has arisen.

the reasons. on which the decision is based, the context reveals that it is intended simply to demonstrate that the disputed contracts were drawn up with the same intent as any contract of supply not containing a retention of

ownership.

This ground is accordingly unfounded.

B —

According to the applicant, the contested decision conflicts with Articles 3 (b) and 4 (b) of the Treaty, since it imposes the equalization levy on scrap covered by a retention of ownership clause, whilst exempting scrap returned to the person ordering a jobbing contract on completion of the contract.

It is clear from the foregoing that subjecting the scrap in dispute to the equalization contribution accords with the true purpose of the equalization

accords different treatment on the one hand to the scrap in question and on

the other hand to scrap returned to the person ordering a jobbing contract on completion of the contract.

The defendant was under no obligation to state its reasons for not charging the equalization contributions on other of scrap, but only those categories

which led it to conclude that the scrap in question constituted 'bought scrap'.

The grounds stated in the decision reveal those reasons in a manner both detailed and clear.

Accordingly this claim is unfounded.

arrange its relationships with Phenix-Works and La Rochette as to avoid in whole or in part the payments for which it now finds itself liable.

1. The applicant claims that, during the period running from the commence­ ment of the equalization scheme to the month of November 1956, the de­ fendant 'neglected or omitted to draw the attention of undertakings to the

existence of the problem in question'.

ESPÉRANCE- LONGDOZ v HIGH AUTHORITY

It claims that the first contract concluded between it and Phenix-Works was known to the Market Division of the High Authority from 1953 onwards, and the defendant does not dispute this.

It has been established that the contract referred to above was submitted to

account all aspects of the case, it cannot be accused of not having taken the initiative in order to avoid the consequences for the applicant of the error

complained of by the latter.

2. It has been established that in November 1956, when the first check was carried out on the applicant firm, the officials of the Société Fiduciaire Suisse (SFS), while aware that the applicant was receiving scrap from Phenix-Works which it did not declare as 'bought scrap', did not refer the problems to the bodies responsible for the administration of the equalization scheme.

The applicant claims that the officials gave it 'every assurance that the con­

tract was effective as regards the problem of liability to pay contributions'.

The file of the case shows that the task of these officials was one of checking and inspection, and excluded any administrative duty which might confer on them the capacity of representatives of the defendant.

recovered by (the consumer undertaking) in its own works bearing the same company name'.

This being so, the applicant could not at any time be certain that it would not have to pay the contributions in question.

The applicant's allegation is therefore unfounded, even if its claims concern­

ing the conduct of the officials of the SFS are accurate in fact.

Accordingly, it is not necessary to grant the applicant s request for an inquiry into the matter.

It follows from these considerations that the application for damages must be rejected.

Having regard to the Protocol on the Statute of the Court of Justice of the European Coal and Steel Community;

Having regard to the Rules of Procedure of the Court of Justice of the European Communities, especially Article 69,

THE COURT

hereby:

I. Dismisses the application as unfounded;

ESPÉRANCE-LONGDOZ v HIGH AUTHORITY

Index

Introduction (facts, submissions of the parties) 1086

Legal consideration 1087

I —The applications for annulment 1087 I. Preliminary remarks as to the retention of owner­

ship clauses 1087

(a) Espérance-Longdoz 1087

5. Are the general decisions on scrap equalization

contrary to the Treaty? 1091

(a) Infringement of Article 5 and 83 of the

Treaty 1092

(b) Infringement of the rule of non-discrimina­

tion 1092

within a reasonable time 1095

2. The assurances of exemption from contributions 1097

3. The burden of interest 1097

4. Summary 1097

III — Conclusions 1098

1 — Translated from the German.