C-59/70

1. It follows from the common purpose is so a fortiori once it is clear that of Articles 33 and 35 that the re­ the Commission has decided to take quirements of legal certainty and of no action. the continuity of Community action underlying the time-limits for bring­ 2. The duty of cooperation imposed on ing procedings laid down in Article 33 Member States by Articles 86 must must also be taken into account— prompt a Member State which con­ having regard to the special difficulties siders that a measure adopted by an­ which the silence of the competent other Member State is contrary to authorities may involve for the in­ the Treaty to resort to the procedures terested parties—in the exercise of the or means of legal action placed at its rights conferred by Article 35. Where disposal by the Treaty in sufficient the Commission fails to act the in­ time to ensure that effective interven­ terested parties are therefore bound tion is still possible and that the to raise the matter with the Commis­ position of third parties is not need­ sion within a reasonable period. This lessly called in issue.

In Case 59/70

Government of the Kingdom of the Netherlands , represented by Professor W. Riphagen, Legal Adviser at the Ministry for Foreign Affairs at The Hague, acting as Agent, assisted by C. R. C. Wijckerheld Bisdom, Advocate at the Hoge Raad, with an address for service in Luxembourg at the Netherlands Embassy, 8 rue Pierre-d'Aspelt, applicant, v

Commission of the European Communities , represented by its Legal Advisers, B. van der Esch and E. Zimmermann, acting as Agents, with an 1 — Language of the Case: Dutch.

gives the following

JUDGMENT

Issues of fact and of law

I — Facts and procedure 'The increase in competition and the consequent fall in prices on all markets The facts and procedures may be sum­ lie at the root of the difficulties experi­ marized as follows: enced by the iron and steel undertakings 1. By French Law No 65- 1001 or in financing their investment pro­ November 1965 (OJ 1965, p. 10594) the grammes. Because of the worsening of Plan for economic and social develop­ their operating results they have been ment for the years 1966-1970, known as compelled to take up ever-increasing the Vth Plan, was approved as a frame­ loans, so that their total indebtedness at work for the investment programmes for the end of 1964 had risen to 68% of this period and as a guideline for their annual turnover instead of the 45% economic expansion and social progress ("Article 1 of the Law). sought for 1965 under the IVth Plan'. Annexed to the Vth Plan are various The desired increase in the possibilities 'plans professionals' (plans for sectors of of self-financing through the efforts of the economy) in which fuller details are the undertakings and the industry and by given of the objectives and means of means of support measures by public action necessary for the implementation authorities can—according to this plan— of the Plan in a specific sector. The 'plan only be realized by a corresponding im­ professionnel' for the French steel indus­ provement in the conditions of competi­ try states: tion of the French iron and steel industry

NETHERLANDS v COMMISSION

2. In order to achieve this aim the 4 (c) was not applicable, and that there French Government and the Chambre was no occasion for a recommendation to Syndicate de la Sidérurgie Française be made under Article 67. At the meet (Association of French Iron and Steel ing of the Council of Ministers of 29 Masters) concluded on 20 July 1966 a June 1967, it made its attitude known to General Agreement the purpose of which the Member States. In view of the reser is: the joint formulation by the Gov vation then made by the Netherlands ernment and the industry of a pro Govrenment, the matter was referred to gramme designed to achieve this aim the single Commission which had been through common action and of the means set up in the meantime. Furthermore, by which each party shall use towards this letter of 5 April 1968 the Netherlands end during the period of implementation Government requested the new single of the Vth Plan'. Commission to set out its attitude during This programme contains two principal

programme. Taking into account repay ernment on 9 December 1968. It stated ments of long and medium term loans, therein that there was no occasion either share holdings, an increase in the work ing assets necessitated by the planned for the application of the prohibition in increase in turnover, and higher divi Article 4 (c) of the ECSC Treaty, or for dends and taxes on the improved results the application of Article 67. expected in consequence of the capital 5. The Netherlands Government was not expansions planned, the overall financial satisfied with this answer and by letter needs of the iron and steel industry for of 24 June 1970 it raised the matter with the years 1966 to 1970 are estimated at the Commission under Article 35 of the

JUDGMENT OF 6. 7. 1971 — CASE 59/70

the French Republic under the same III — Submissions and argu­ Article 67. ments of the parties 6. Since the Commission 's only reaction to this request was an acknowledge­ The submissions and arguments of the ment dated 17 June 1970, by an ap­ parties may be summarized as follows: plication dated 12 October 1970 the A — Admissibility Netherlands Government brought an action for failure to act seeking the The Commission, the defendant in the annulment of the implied refusal to action, puts forward two submissions of take a decision on the basis of Article inadmissibility based, first, on the late 88, or alternatively, of the implied re­ submission of the application and, fusal to make a recommendation under secondly, on the absence of any plea Article 67(2). of misuse of powers. Upon hearing the preliminary report 1. The alleged late submission of the ap­ of the Judge-Rapporteur and the views plication of the Advocate-General, the Court de­ cided to open the oral procedure with­ Although Article 35 of the ECSC Treaty out holding any preparatory inquiry. specifies no period within which a mat­ ter must be referred to the Commission The parties presented oral argument at in order for it to take a decision or make the hearing on 26 May 1971. The Advocate-General delivered his a recommendation, the defendant con­ opinion at the hearing on 10 June siders, however, that by allowing more 1971. than eighteen months to pass between being fully informed of the Commission's final position (9 December 1968) and raising the matter with this institution II — Conclusions of the (24 June 1970) the Netherlands Govern­ parties ment allowed the reasonable period for bringing proceedings for failure to act The applicant claims that the Court to lapse. should: Although the communication or 9 '—annul, on the ground of infringe­ December does not in itself constitute

basis to be removed after a period of plications for the loans had to be made years. The Netherlands Government has before 31 December 1966, that is, before acknowledged this to a certain extent, the Commission established its final atti since it accepts that where the Commis tude and before the Netherlands sion is led to adopt a decision on the Government could institute proceedings basis of Article 88 of the ECSC Treaty under Article 35. Secondly, a judgment which records a State's failure to fulfil of the Court in the sense desired by the an obligation it is not necessarily bound applicant would merely result in an ob to give its decision retroactive effect. The ligation on the Commission to take a Commission adds that even if the ap decision within the meaning of Article plicant's point of view was correct 88 of the ECSC Treaty, which would reasonable time-limits for bringing pro in no way affect the repercussions of ceedings would still be required for the such a decision on the loans already purpose of legal certainty. agreed. The obligation to cooperate imposed on Finally, the applicant considers, in the the States by Article 86 compels them alternative, that the period which it al to bring before the Court within a lowed to elapse before making its request reasonable period an application for fail was in no way unreasonable.

respect for established situations in order the difference in wording between the to declare the application inadmissible. second and third subparagraphs of para First, under the General Agreement ap graph (2), the first of which uses the

phrase 'may authorize' and the second ings in the other Member States. This the phrase 'shall make' is unimportant latter situation is particularly harmful to as in both cases the Commission enjoys the Common Market and therefore ob a certain latitude in deciding whether the liges the Commission to intervene. economic conditions referred to by these The applicant maintains mat once me subparagraphs are satisfied. conditions for its intervention, both un The application is therefore inadmissible, der Article 88 and the third subpara since no misuse of powers has been graph of Article 67 (2), are fulfilled, the

Ac freedom of the Commission to act or to cording to the case-law of the Court refrain from acting, it must be remember even a measure which is taken by a ed that the third subparagraph of para Member State in the exercise of the graph (2) does not use—intentionally— powers which are reserved to it and the words 'may make' but specifies that which involves the grant of a sub die High Authority 'shall make' a recom sidy or an aid to the economy can

NETHERLANDS v COMMISSION

Communities v French Republic, by Article 4(c). Logically, subsidies [1969] ECR 523). can only be prohibited under the The purpose or the second subpara­ same conditions. graph of Article 67(2) is to confer — Article 67(3) draws a parallel between on the Commission power to grant special benefits and special charges. such an authorization, provided that The same parallel must be seen in the conditions laid down in the first Article 4(c). subparagraph of Article 67(2) are — The ECSC Treaty only achieves par­ satisfied. However, in the case of a tial integration, as the powers of the violation of the express prohibition Member States in the sphere of gen­ contained in Article 4(c) these pro­ eral economic and industrial policy visions cannot serve to legitimize the remain intact. This implies that the measures of the Member States Member States may continue to take which provide aid to the coal and general measures in order to encour­ steel sector, when no serious dis­ age economic and industrial develop­ equilibrium of the conditions of com­ ment, on condition that they do not petition has been provoked. give particular benefit to the coal and (b) The applicant adds that at all events­ steel sector. —even supposing that the prohibition The prohibition in Article 4(c) is contained in Article 4(c) only refers intended to prevent the intervention to the special aids granted to in­ in question from adversely affecting dustries in the sector concerned by conditions of competition in this sec­ the ECSC Treaty—the loans in ques­ tor and not to prevent the Member tion fall within the scope of this States from taking general measures provision. in their countries in order to encour­ The loans granted by the FDES are age economic and industrial develop­ selective, both as regards the econ­ ment.

JUDGMENT OF 6. 7. 1971 — CASE 59/70

patible with the common market. A criteria. Neither on the basis of the limited exception to this rule is possible wording of Article 67 nor of the spirit in order to achieve certain of the objec of the ECSC Treaty must it be con tives provided for in Articles 92 and 93 cluded that such a measure ceases to be of the EEC Treaty. These objectives are general following this kind of selective all related to the exercise of the powers application. retained by the Member States.

in question. Without in any way deny contained in Article 4(c) are not con ing the independence of each Treaty, the vincing: their special nature was essen Commission considers that the best in tially limited to those charges to which terpretation is that which shows the its full meaning applied, while in re greatest respect for the functional unity lation to these aids which are by their of the Community. very nature, exceptional, this reference The defendant adds, as to (b), that as was superfluous. regards the special nature of the aids to As regards the parallel contained in the iron and steel industry, no evidence Article 67(3) between the special nature of this has been brought in this instance. of the charges and that of the benefits, A consideration of all the low-interest the applicant maintains on the basis of loans accorded by the FDES shows the judgment of the Court of Justice in

however, mistaken. Although the meas­ (iii) The harmonization which the Com­ ures adopted by the Member States in mission wishes to see between the ECSC the exercise of the general powers which Treaty and the EEC Treaty in matters of they have retained must always be aid may not result in an infringement of assessed in the light of Article 67 of the the Treaty. Moreover, the defendant is Treaty, where they are capable of having disregarding the possibilities offered by appreciable repercussions on the con­ the ECSC Treaty in Articles 37, 54, 56, dition of competition in the coal and 67 and 95 which enables a policy of steel industry, it is, on the other hand, subsidies to be followed in harmony on the basis of the principles of the with Articles 92 and 93 of the EEC common market itself and in particular Treaty, sunbject to review by the Com­ Articles 2 to 5 of the Treaty rather than munities. The High Authority has in in the light of Article 67, that their fact taken advantage of this opportunity validity must be assessed, not only when in preparing its decision on the Com­ they have such repercussions but when munity scheme of intervention by the they are clearly intended to change the Member States in favour of the mining conditions of competition and therefore industry (Decision No 3/65, OJ 1965, concern 'directly the coal and steel pro­ p. 480). ducing undertakings, within the meaning The harmonization in question is in fact given to this word by the case-law of on another level: when a measure grant­ the Court in his judgment in Givors ing aid falls outside the scope of Articles (Joined Cases 27 to 29/58, Rec. 1960, 4 and 67 of the ECSC Treaty it is con­ o. 526). ceivable, supposing that it is covered by As regards the question of determining the reserved powers, that it may be what it is which directly concerns the examined in the light of Article 92 of the industries governed by the ECSC EEC Treaty, so that the States may have Treaty, the applicant observes that the the same power of granting aids in the criterion put forward by the Commis­ EEC sector as in the ECSC sector. sion—the non-discriminatory exercise of Furthermore, the applicant continues to the powers retained by the Member maintain that even if Article 4(c) is States—is of no value in the case of interpreted in the sense suggested by the action to grant a direct subsidy or aid to Commission the measures adopted by industry which thus concerns it directly. France are still subjected to the pro­ The mistaken nature of the criterion of hibition contained in this provision. the non-discriminatory exercise of the The Vth Plan merely constitutes the powers retained, advocated by the Com­ general framework within which a series mission, is easily demonstrated when of aids are carried out which are not practical applications of this criterion applicable to every branch of industry are made. but only to those which have been judgment of 6. 7. 1971 — case 59/70

in other countries. The Netherlands Government, too, ac­ Under the Vth Plan the grant of aids to cepts that it is the Member States which other sectors for the achievement of their are in the first place responsible for the own objectives and according to pro­ balanced development of their national cedures which are in accordance with economies, and that this responsibility their needs does not change the special justifies State intervention which, by nature of the aids granted to the iron definition, is confined to the national and steel industry. sphere. Furthermore, it is irrelevant to com­ This applies particularly to those sectors pare the rates of interest at which loans of the economy which are of social and are made to the French iron and steel regional importance, such as the coal and industry with those made to the other steel producing industries. In this in­ industries: the question is not whether stance, as regards iron and steel, the the steel industry receives more sub­ French Government was dealing with an sidies than another industry which also industry requiring large investments in receives the benefit of loans, but rather order to renew its equipment at a time whether it receives a subsidy which when little capital was available. Faced affects it directly. In case it may be use­ with social problems raised by this ful, the applicant adds that the iron and state of affairs, France adopted general steel industry to all intents and purposes reorganization measures from which the enjoys special privileges. French iron and steel industry could not In its rejoinder the defendant replies: be excluded. (a) As regards the nature of the aids (ii) The action of the French Govern­ prohibited under Article 4(c), only ment cannot be described as discrimina­ those which benefit principally the tory merely because it results in the coal and steel industries may be re­ French undertakings' being treated dif­ garded as prohibited. ferently from foreign undertakings. This (i) As regards the charges the Court has is an inevitable consequence of the fact accepted in Case 30/59 (Judgment of that the powers retained only extend to 23 February 1961, Gezamenlijke Steen- the national industries. kolenmijnen, Rec. 1961, p. 55) that only (iii) The lnterpretation suggested by the independent charges—that is those which Commission has the advantage of en­ are not linked to the general economic abling the two Treaties to be coordinated. policy of the States—are referred to in In fact, if all measures to aid the iron Article 4(c). It must be possible to ac­ and steel industry were prohibited, the cept this as regards the aids. If such aids result might be that for regional and form part of the general economic policy social reasons comparable measures must of the States cannot directly affect these be taken on the basis of the EEC Treaty industries (within the meaning of the in favour of other industries in the same case-law of the Court of Justice: Judg­ sector. Although the independence of the ment of 10 May 1960, Joined Cases 27 two Treaties must be respected, there to 29/58, Givors v High Authority (Rec. are, however, from this point of view, 1960, p. 526). In fact, the acceptance of certain aspects which cannot be neglect- netherlands v commission

by the other important sectors (cf increase differences in production Schedule I to the rejoinder). costs, but to reduce them. In fact, the production costs of the French iron 2. Infringement of Article 67 and steel industry are among the The applicant alleges in the alternative highest in the Community. The loans that the loans in dispute must be con­ therefore reduced the differences in sidered—as the Commission accepts—as cost.

action by a State which is liable to have It is only possible to speak of an appreciable repercussions on conditions increase in the differences in produc­ of competition in the coal and steel tion costs in relation to the iron and industry. steel industry of one other Member If, by substantially increasing differences State. in production costs otherwise than — Furthermore, the question whether a through changes in productivity, the possible increase may be called sub­ action in question was liable to provoke stantial depends on the actual relief a serious disequilibrium, the Commis­ which the loans afforded to the under­ sion would be bound under the third takings in their new investments. In subparagraph of Article 67(2) to make a this instance, in the light of the fact recommendation to the French Gov­ that the financial burden of the in­ ernment. vestments represents a rather small

JUDGMENT OF 6. 7. 1971 — CASE 59/70

increase in the differences in production Finally, the applicant maintains that the costs it is not, as the Commission con­ disequilibrium caused was serious: a siders, the total production costs which slight reduction in costs is in itself likely must be compared but rather those to bring about a sizeable increase in the elements of such costs which are arti­ profit margins and the modernization ficially affected by the action of the allowed was also successful in reducing State. This interpretation is to be drawn the costs to a large extent. The debts from Article 67(3) which clearly cannot owed by the industry cannot be taken refer to differences between aggregate into consideration in assessing the dis­ production costs, as it provides for a equilibrium caused, as to do so would comparison to be made between under­ be to violate the principle that the takings of entirely different types. Community shall progressively bring If this interpretation were accepted it about conditions which will of them­ could not be disputed that the differences selves ensure the most rational dis­ in the costs of financing have increased tribution of production at the highest (as is clear from Schedule I to the reply possible level of productivity. The fact setting out the figures for the rates of that in other States aids, whether overt interest applied in the EEC from 1966 or covert, are granted is not established to 1970). by the defendant which demonstrates, Moreover, even if the increase in costs moreover, by its tolerance of these aids had to be assessed by comparing the the dangerous course on which it has total production costs, it is shown—as embarked. the Commission has itself admitted—­ The defendant replies that the differ­ that the alleged reduction did not take ences to be compared are those between

2 The defendant challenges the admissibility of the application and points out that a letter dated 4 December 1968, communicated to the applicant on 9 December, informed the French Government of the grounds on which it considered Article 4(c) of the Treaty inapplicable and took the view that no recommendation under Article 67 was necessary.

3 It contends that since the applicant allowed eighteen months to elapse be­ tween the date on which it was informed of the Commission's attitude and the date on which it raised the matter with the Commission, the application is out of time.

4 The French Government informed the High Authority in September 1966 of its intention to adopt the measures set out in the said Plan in favour of the iron and steel industry.

5 At the meeting of the Council on 29 June 1967 the High Authority informed the Member States that according to its preliminary investigation the pro-

JUDGMENT OF 6. 7. 1971 — CASE 59/70

hibition in Article 4(c) was inapplicable and that no recommendation under Article 67 was necessary.

12 Article 35, which is intended to extend the power to review the legality of the conduct of the Commission to those cases where this institution refrains

from taking a decision or from making a recommendation, affords an oppor­ tunity to institute proceedings before the Court on the basis of the fiction of an impiled decision of refusal arising on the expiry of a period of two months' in cases where the Commission is required or empowered by a provision of the Treaty to take a decision or make a recommendation but refrains from doing so.

13 On the expiry of this period of inaction, the interested party has a further period of one month to institute proceedings before the Court.

14 However, the Treaty does not provide for any specific periods for the exercise of the right to raise the matter with the Commission under the first and second paragraphs of Article 35.

NETHERLANDS v COMMISSION

15 It follows, however, from the common purpose of Articles 33 and 35 that the requirements of legal certainty and of the continuity of Community action underlying the time-limits laid down for bringing proceedings under Article 33 must also be taken into account—having regard to the special difficulties which the silence of the competent authorities may involve for the interested parties—in the exercise of the rights conferred by Article 35.

22 In view of these circumstances, a period of eighteen months between the communication of 9 December 1968 and the request addressed to the Commission on 24 June 1970 in order to initiate the procedure provided for in Article 35 cannot be regarded as reasonable and was all the more unjustifi-

JUDGMENT OF 6. 7. 1971 — CASE 59/70

able in that the character of the communication of 9 December 1968 was in no way new or unexpected. Therefore on 24 June 1970 the Netherlands Government was no longer in a position to take advantage of Article 35 of the Treaty.

24 The application must be dismissed as inadmissible.

Costs

25 Under the terms of Article 69 (2) of the Rules of Procedure the unsuccessful party must be ordered to pay the costs.

2. Orders the applicant to pay the costs.

Lecourt Dormer Trabucchi

Monaco Mertens de Wilmars Pescatore Kutscher

Delivered in open court in Luxembourg on 6 July 1971.

A. Van Houtte R. Lecourt Registrar President