C-26/66

1. The statement of reasons for a de­ vity which created it was carried out cision must contain the essential ele­ constitutes an undertaking's own re­ ments of the High Authority's reason­ sources.

ing in such a way that the Court and Cf. paragraph 2, summary, Case all persons concerned may check that 50/65, Rec. 1966, p. 210. the legal provisions in question have 3. If the defective drafting of a measure been correctly applied. . for which the defendant is respons­ Cf. paragraph 1, summary, Case ible, has given rise to an application, 36/64, Rec. 1965, p. 426. this amounts to an exceptional cir­ cumstance allowing the Court to 2. Ferrous scrap which has not been order that the parties bear their own acquired for a consideration and costs.

which is re-used by 'the undertaking Cf. paragraph 4, summary, Case on whose behalf the production acti- 14/63, Rec. 1963, p. 723.

In Case 26/66

Koninklijke Nederlandsche Hoogovens en Staalfabrieken NV, a limited company having its registered office at IJmuiden (Velsen), repre­ sented by P. R. Bentz van den Berg, a member of the Board of Directors, assisted by J. Mertens de Wilmars, Advocate of the Antwerp Bar, with an address for service in Luxembourg at the Chambers of Ernest Arendt, 6 rue Willy-Goergen, applicant, v

High Authority of the European Coal and Steel Community, repre- 1 — Language of the Case: Dutch.

Registrar : A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Summary of the facts price on the internal Netherlands mar­ ket, or else it is acquired at the price The facts may be summarized as fol­ obtaining on the European market. Own lows : arisings obtained in Hoogovens' rolling The disputed amount relates to steel mill and deriving from processing the received from 'third parties either by the steel into ingots were re-used by this Breedband company or the Netherlands company. The amount for which the Verkoopkantoor voor Walserijprodukten applicant was assessed by the decision (hereinafter referred to as the 'NVW') of 20 July 1966 for equalization charges to be made into rolled coils as con­ relates to this scrap. tract work. This calls for two successive The applicant made 'the present applica­ operations: rolling the ingots into slabs tion against this decision which con­ and then rolling the slabs into coils. siders the ferrous scrap in question as The Breediband company carries out bought scrap. only the second operation whilst the first is carried out by the applicant. The contracts, concluded between Breedband II — Conclusions of the or the NVW and the undertakings on parties whose behalf the rolling is carried out, provide that scrap arising in the course The applicant claims that the Court should: of carrying out those contracts becomes the property of Breedband or of NVW 'Annul the decision of 20 July 1966 respectively, on payment of the current addressed to the applicant by letter of

NEDERLANDSCHE HOOGOVENS v HIGH AUTHORITY

The applicant replies that entirely new B — The substance of the case reasons were put forward in the state­ ment of defence, namely: In support of its application, the appli­ (a) the disputed scrap was group scrap; cant relies successively on the ground (b) between Hoogovens and Breedband of infringement of an essential pro­ there was a relationship with regard cedural requirement and the grounds of to rolling steel on contract on which infringement of the Treaty and of the the foregoing reason is also based. basic decisions relating to the equal­ Assuming that these reasons carried ization scheme. some weight, they ought to have ap­ peared in 'the contested decision. 1. The submission of infringement of That the statement of reasons for the an essential procedural requirement contested decision was inaccurate is also The applicant alleges 'that the contested clear from the fact that, in its state­ decision failed to specify the contracts ment of defence, the High Authority for rolling concluded between Breed- abandoned the argument derived from band or the NVW and third parties. the recitals in the preamble to this de­ Furthermore, the decision gave no in­ cision, according to which only ferrous formation on the contractual provisions scrap originating from steels produced whereby the ownership of the ferrous by 'the undertaking itself could be re­ scrap in question was transferred to garded as own resources. Hoogovens. Information on this matter The defendant on the other hand main­ is necessary to understand the High tains that all the arguments employed Authority's reasoning on 'the transfer of by it in the course of the proceedings the ownership of the ferrous scrap conform to the original statement of which it claims took place. reasons, even when their purpose is to

refute the applicant's new assertions. It ferrous scrap produced in the course of denies moreover that it has abandoned that process. However, this means that, its arguments. It has restricted itself to even if the applicant's undertaking pro­ correcting a mistaken interpretation duced the ferrous scrap emanating from placed by the applicant on a passage the processing of steel purchased by it, in the contested decision. the High Authority considers that 'the destination of this scrap is contractually 2. The submission of infringement of governed by an implied clause relating the basic decisions of the equaliza­ to the transfer for a consideration of tion scheme the ferrous scrap produced. At the base of the various arguments Since this concept is identical with that which have been invoked toy the parties put forward by the defendant concern­ in connexion with this submission, is a ing the ferrous scrap in dispute, it is fundamental difference between the illogical to treat both cases differently, parties on the importance which the (to) The importance of technical and production of ferrous scrap by the un­ economic factors characterizing the posi­ dertaking rolling steel on contract and tion of the ferrous scrap is not lessened its re-use by the same undertaking can by the existence of contractual relations play in defining the concept of own governed by private law, to which the resources. The applicant claims that this case-law of the Court denies any con­ scrap should be exempt as own resour­ clusive value in 'the context of the equal­ ces, in particular for the following ization scheme. reasons: Relationships governed by private law (a) The definition of own resources would only be conclusive in this sphere refers essentially to ferrous scrap which if the organization of production which is the actual product of the undertak­ makes it possible for 'own resources' to ing's own activity, the result of its own be distinguished did not exist. On the work, as has been stated in the judg­ other hand, when this organization does ment in the Esperance-Longdoz case. exist, as in the present case, it is the Hoogovens organization is such as to sole determining factor for categorizing facilitate, by re-using in its own pro­ the ferrous scrap, and in this case re­ duction cycle ferrous scrap which it lationships under private daw cannot produces itself, an improvement in the transform own resources into bought productivity of the undertaking within scrap.

the undertaking which rolls steel on on 'the rolling contractors, so that with contract is carrying on its business, and regard to the equalization contribution, thus producing ferrous scrap from the there is a clear distinction between pro­ rolling on its own behalf and at its own cessing bought steel ingots and rolling risk, since the price of the rolling is steel on contract. fixed in advance and thus cannot take In other words, for the purposes of account of possible alterations in the exemption it is essential that the con­ amount of the expenses previously pro­ cept of productivity should relate to vided for. ferrous scrap for which the contribu­ The defendant on the other hand con­ tion has already been paid. The indus­ siders that these technical and economic trial criterion of the recovery of ferrous factors must be considered in the con­ scrap within the consumer's plant can­ text of the legal relationships existing not prevail over this ratio legis, which when the ferrous scrap was produced is a conclusive factor in the exemption and particularly in relation to the acti­ of own resources. vity whereby they were produced, and (b) The fact that the Court has ruled the manner in which the roller acquires that relationships governed by private them. In the present case, the appli­ law are not such as to modify the cant can only avoid returning to its 'actual situation' with regard to ferrous customers the ferrous scrap obtained scrap does not mean that no relation­ from rolling by an agreement, express ships under private law are of any im­ or implied, and on the payment of a portance in ascertaining the actual situ­ price. This is sufficient for the disputed ation with regard to ferrous scrap. When scrap to be regarded as bought scrap. it ruled that in certain cases relation­ The defendant further 'maintains that: ships under private law have no con­ (a) The internal economic function of clusive validity, the Court only intended the re-use of ferrous scrap in the manu­ to prevent the undertakings liable for facturing cycle is not the sole factor to equalization from evading their obliga­ be borne in mind in deciding whether tions by legal subterfuges. the ferrous scrap is own resources or Nor must it be forgotten that, for the bought scrap. The Court based the ratio purposes of the equalization scheme, legis for the exemption of ferrous scrap the concept of 'bought scrap' is the rule on the need to avoid fresh equalization and the concept of 'own resources' is contributions on ferrous scrap derived the exception. Consequently, it is im­ from other arisings, for which the same possible to make the classification of consumer has previously paid the con­ bought scrap dependent on the absence tribution. of any of the characteristics of own It is logical that ferrous scrap recovered resources.

person who placed the order. ations economically and technically the The applicant replies that it did same, the applicant alleges that the High not pay for the ferrous scrap Authority considered as the conclusive nor did it provide any consideration factor in the definition of own resources for it 'under the contractual obligations legal relationships under private law, referred to by the High Authority'. It and especially, the ownership of the denies in particular that there was a ferrous scrap arising from these legal contract for rolling between Hoogovens relationships. and Breedband and that Hoogovens was The defendant replies that ferrous scrap a party to the contracts for rolling con deriving from bought steel or from an cluded between Breedband or the NVW undertaking's own resources are to be on the one hand and the customers considered own resources not because

contractor. The applicant complains cant has never disputed the existence moreover that the contested decision of this entry. This fact is sufficient to ignored the decision of the Joint Bureau prove the existence and the content of of Ferrous Scrap Consumers (herein the agreement whereby the ferrous scrap after referred to by its French initials in question remained with Hoogovens. as the 'OCCF') of 9 December 1957 Moreover, the Hoogovens company, in from which it is apparent that scrap its letter of 25 April 1966 to the High deriving from rolling under contract is Authority, mentioned 'legal relationships exempted from the equalization levy as which existed and contractual obliga the roiling contractor's own resources. tions to other undertakings'.

under Article 4 of basic Decision No clusive importance in this matter. The 2/57. This amounts to granting an point at which the property in the fer exemption to the customer although he rous scrap passed to the applicant may neither produces nor re-uses the scrap, be similarly ascertained. whereas although the contractor fulfils With reference to the different treat completely both of the conditions re ment accorded by the defendant to situ- quired for exemption from the equaliza-

tion levy, that is to say, production of defendant, all that is essential is to pre the ferrous scrap and its re-use in his vent any bought scrap from escaping own undertaking, he is subject to these the contribution. charges. Such consequences are incom In its reply, the applicant complains patible with the equalization system. that, in its statement of defence, the The defendant replies that the rules defendant maintained 'that the ferrous issued by the OCCF were prescribed scrap in dispute was part of Breedband's solely for cases where contracts for 'group scrap'. rolling had been concluded between The defendant replies that it merely two undertakings consuming ferrous doubted Hoogovens' argument to the scrap in order to harmonize their declar contrary; it might in fact be suspected ations with regard to ferrous scrap. that Hoogovens had acted as Breed- In this case, the contracts for rolling do band's sub-contractor, that 'is to say not oblige the person placing the order that in fact it acted as rolling contrac

of the Treaty moreover if the High Authority was justified in believing that there was a The applicant maintains that the con contract for rolling between the appli tested decision infringes, at Hoogovens' cant and Breedband, the application of expense, the principle of equal access this provision would result in exempting to the sources of production and the scrap in dispute from all charges. neither promotes the fixing of the lowest The applicant goes on to say 'that it is prices, nor the maintenance of con not for the undertakings but for the ditions encouraging undertakings to ex High Authority and its agencies in each pand and improve their production case to ascertain the position of the potential. undertakings with regard to the equal In support of this submission, the ap

JUDGMENT OF 14. 6. 1967 — CASE 26/66

With regard to This circumstance highlights the dis this latter case in particular, the appli criminatory nature of the High Author cant states that the rolling process is ity's concept. controlled not by the management of the The discriminatory effects of this con rolling mill, but by an authority co cept also result from the fact that, in ordinating the schedules of the steel the example quoted above, the High works and of the rolling mill. Authority exempts from the levy ferrous The defendant replies, with regard to scrap which does not differ significantly the ferrous scrap derived from contract- from the said group scrap and ferrous rolling returned to the customer, that scrap which is returned under a reser the latter does not pay for the equival

cannot be regarded as a production act tracts, the rolling is defined in the terms ivity of the steelworks belonging to the of the contract. group, as the rolling programme is de With regard to group scrap the defend cided by the management of the rolling ant observes that in the context of the mill and not by that of the said works. relations within the group, the rolling As regards the ferrous scrap returned schedule, as the applicant admits, is not on the basis of a reservation of rights established toy the steelworks, which of ownership, it was obtained in the means that no comparison can be made course of rolling and is entirely excluded with the position of the person placing an from the control of the producer of order for rolling steel under contract.

NEDERLANDSCHE HOOGOVENS v HIGH AUTHORITY

ant should be ordered to pay the costs tude of which it complains. even if the application is dismissed, be­ In its rejoinder, the defendant denies cause, owing to the uncertainty which that this criticism is well-founded and the High Authority has caused with alleges that the applicant has often in­ regard to the legal position of the fer­ terpreted the High Authority's point of rous scrap in dispute, the applicant view incorrectly or incompletely. would have been obliged in any event to obtain a decision from the Court to discover which of the basic decisions IV — Procedure successively applied by the High Authority is to be considered as ap­ The procedure followed the normal plicable. course.

JUDGMENT OF 14. 6. 1967 — Case 26/66

According to the defendant's reasoning, the precise determination and descrip­ tion of the legal relationships connecting Hoogovens to Breedband and the NVM or possibly to those placing the orders for contract-rolling, are irrelevant for fixing the position of the disputed scrap within the framework of the equalization system. On this view, and without prejudice to any decision as to whether the High Authority's concept is well-founded, it was unnecessary to state in any greater detail the nature, subject-matter and content of the above- mentioned contracts.

The contested decision does not show clearly the legal title whereby the appli­ cant acquired the ownership of the ferrous scrap. However this lack of clarity is explicable in the context of the legal point of view propounded by the High Authority, which is that there is no significance in the type of legal relation­ ships whereby the acquisition was made where the acquisition in question is for a consideration.

Finally, in giving reasons for its view that there are no discriminatory effects, the decision stated that the legal, economic and technical position of a steel undertaking which carries out contract-rolling is different from that of an undertaking which on its own account rolls ingots which it owns. Although this justification cannot be considered as exhaustive, it does set forth the essential elements of the High Authority's reasoning in such a way that the Court and all persons concerned may check that the legal provisions in question have been correctly applied.

In this context, own resources may be defined a contrario from the broad con­ cept of bought scrap. Nevertheless a purely negative concept, even though uniform, is insufficient to satisfy other basic requirements of the equalization scheme. In fact this scheme must first and foremost prevent ferrous scrap from unjustifiably escaping equalization charges by the use of purely formal criteria. It is moreover necessary to prevent exemptions from distorting competition in the Common Market. This would be so if the effect of this concept were to confer an advantage on certain undertakings at the cost of other under­ takings in a comparable situation with regard to the production and con­ sumption of ferrous scrap and consequently the organization of their production.

In defining own resources, there must be added to the negative criterion that there has been no acquisition for a consideration a positive, economic criterion, based on the organization of the undertakings consuming ferrous scrap. Ac­ cording to this criterion ferrous scrap can only be regarded as own resources if it is re-used either by the actual undertaking which produced it or by the undertaking on whose behalf the production activity which created it was carried out.

In this case it is not disputed that the customers placing the orders for contract-rolling had agreed with Breedbank or the NVW that the ferrous scrap produced in carrying out the contracts in question should be retained by Breedband or the NVW against the payment, by way of set-off, of the prevailing price for ferrous scrap in the Netherlands. The right to dispose of the ferrous scrap is thus dependent on the payment of the price for it and the customers received the agreed price for this ferrous scrap. Furthermore, it is clear from the information supplied by the defendant in the course of the oral proceedings, which the applicant has not disputed, that the customers de­ ducted from the basis of their assessment to contribution the tonnages of ferrous scrap sold to third parties.

There is thus no foundation in the applicant's claim that the exclusion of the ferrous scrap in question from the category of own resources contradicts the general basic decisions of the equalization scheme.

3. The complaint of discrimination

The applicant complains that the contested decision has discriminatory effects as regards the applicant both in comparison with the undertakings which roll bought steel and with those who place orders for contract-rolling and obtain exemption in respect of the scrap returned to them. The consumption of ferrous scrap by the owner of the steel from which it arose, in the context of a production activity carried out either directly by himself or on his behalf is clearly distinct, both legally and economically, from the applicant's consump-

NEDERLANDSCHE HOOGOVENS v HIGH AUTHORITY

tion of the ferrous scrap in dispute. This is because in both of the first two the ferrous scrap was not as such acquired for a consideration. Furthermore this ferrous scrap has always remained within the limits of the production cycle organized by the owner of the steel, and on a technical level it is of little importance whether this activity was carried on directly by him or through third parties working on his behalf. These differences are such as to provide objective justification for the different treatment given, under the equalization scheme, to scrap corning within the first two of the above- mentioned cases on the one hand and the ferrous scrap in dispute on the other.

Consequently the complaint of discrimination is unfounded.

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, 33 and 53 of the Treaty establishing the European Coal and Steel Community; Having regard to the decisions of the High Authority concerning the ferrous scrap equalization scheme;

OPINION OF MR ROEMER — CASE 26/66

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 (2) and (3);

THE COURT

hereby :

I. Dismisses Application 26/66 as unfounded;

DELIVERED ON 2 MAY 19671

Summary

Introduction (Facts: Conclusions) 129

Legal consideration 130

1. Infringement of general decisions concerning the equal­ ization of ferrous scrap 130 (a) Facts 130 (b) Must ferrous scrap arising in the course of rolling ingots supplied by third parties be considered as the rolling contractor's own arisings? 131

2. Infringement of Articles 3 (b), (c) and (d), 4 (b) and 5 of the Treaty 135