C-14/81

JUDGMENT OF 3. 3. 1982 — CASE 14/81

In Case 14/81

ALPHA STEEL LTD, whose registered office is at 2 Raymond Buildings, Gray's Inn, London, represented by André Elvinger, of the Luxembourg Bar, with an address for service in Luxembourg at the Chambers of the said André Elvinger, 15 Côte d'Eich, applicant, v

COMMISSION OF THE EUROPEAN COMMUNITIES, represented by its Legal Adviser, Michel van Ackere, assisted by Frank Benyon, a member of its Legal Department, with an address for service at the office of Oreste Montalto, a member of its Legal Department, Jean Monnet Building, Kirchberg, defendant,

APPLICATION for a declaration that an individual decision of the Commission concerning the fixing of production quotas for certain steel products is void (Article 33 of the ECSC Treaty),

T H E COURT

The facts of the case, the course of the "(1) For each month of the relevant procedure and the submissions and quarter, reference shall be made to arguments of the parties may be the same month during the period summarized as follows: from July 1977 to June 1980 during which the total production of the four groups of rolled products was the highest. The three months thus I — Facts and p r o c e d u r e chosen, which will not necessarily be consecutive, shall constitute the reference period. 1 . The background to the dispute (2) The reference production figures shall be the same, for crude steel Bv Decision No 2794/80/ECSC of and for each of the other groups of 3 í October 1980 (Official Journal 1980, roiled products, as the production L 291, p. 1) the Commission established of the corresponding items during a system of steel production quotas for the reference period." undertakings in the iron and steel industry. Paragraphs (3), (4) and (5) of Article 4 describe the special circumstances in Article 2 of that decision provides that which the reference production figures the Commission is to fix quarterly and, hence, the quotas, are to be production quotas for crude steel and for increased. Article 4 (4) provides that the the four groups of rolled products reference production may be adapted in described in the same article and, in the case of an undertaking which, more detail, in Annex 1 to the decision. further to an investment programme duly reported and not the subject of an un- favourable opinion by the Commission, Anicie 3 provides that the Commission is has activated a new plant after 1 July to fix quarterly production quotas "for 1980 which brings the total production each undertaking" on the basis of the capacity for the four groups of products reference production figures of that to a level exceeding by at least 15 °/o the undertaking as referred to in Article 4, total production capacity available for bv application of abatement rates to 1979. those reference production figures as referred to in Article 5. Article 4 (3) provides as follows:

other undertakings of the Community, steel was fixed, after application of the during the years 1977, 1978 and 1979, same abatement rate to a reference the Commission shall increase the production of 87 500 tonnes, at 63 236 reference production figures for this tonnes. undertaking to a level which corresponds to a rate of utilization which lies five The decision also indicated that the percentage points below that average reference production had been adjusted rate in the other undertakings: in accordance with Article 4 of Decision No 2794/80. Provided the undertaking undertook to comply from July 1977 to June 1980 By letter of 19 January 1981, written in with the delivery programmes established English, the applicant submitted a formal by the Commission, and reasoned request to the Commission for re-examination and re-allocation of the production quotas for the first quarter of Provided the programme for this 1981. enterprise was fixed taking 1974 as a basis, and By a decision of 24 February 1981 rectifying the decision of 19 December Provided that during that year all or part 1980, the Commission fixed the of the undertaking's facilities were not reference production before adjustment on stream." at 63 537 tonnes for Group 1 products and 40 153 tonnes for crude steel. By virtue of Article 14 of the decision an undertaking may, if the restrictions The Commission allowed relief under imposed entail exceptional difficulties for Article 14.of Decision No 2794/80. The it, refer the matter to the Commission. rate of abatement was reduced to zero, The Commission may then adapt the so that the quotas are the same as the provisions of the decision. reference production.

mission's decision of 24 February 1981 Declare void the decision dated 19 De- which was sent to the applicant on the cember 1980 whereby the Commission of same day and appears in the annex the European Communities fixed steel hereto." production quotas for the applicant pursuant to Commission Decision No Taking the view that the decision which 2794/80/ECSC of 31 October 1980 is the subject of the action had ceased to establishing a system of steel production exist, the Commission contended that quotas for undertakings in the iron and there was no need for the case to steel industry; and proceed to judgment and asked the Court to rule on costs at its discretion Order the Commission of the European pursuant to Article 69 (5) of the Rules of Communities to pay the costs. Procedure. In the reply the applicant amended its In a reply lodged on 9 April 1981 the claims so as to request the Court to applicant challenged the Commission's declare void the aforesaid decision of argument that there was no need for the 19 December 1980 as amended on case to proceed to judgment. 24 February 1981. In its rejoinder, lodged on 12 May 1981, the Commission maintained the The Commission contends that the Court conclusions formulated in the defence should: but discussed in addition, strictly in the alternative, those of the applicant's Declare that there is no need for the case submissions which the Commission had to proceed to judgment; and not accepted. Rule on costs at its discretion pursuant The President of the Court granted the to Article 69 (5) of the Rules of applicant's request to be allowed to Procedure. lodge a reply "on the substance of the case". That document was lodged on 30 June 1981. At the same time the Ill — Submissions and argu- applicant asked that this case and Case m e n t s of t h e p a r t i e s 111/81 be joined.

Apan from the question whether an The Commission points out that in Case authority may, after proceedings have 4/54 Associazione Industrie Siderurgiche been initiated before the courts, "rectify" Associate (ISA.) v High Authority its decision — and, moreover, not as ([1954-56] ECR 91) and in Joined Cases requested in the application but in the 5, 7 and 8/60 Meroni and Others v High opposite sense, that is to say by making Authority ([1961] ECR 107) the Court it less favourable to the applicant — it is has already held that a decision which is in any case not permissible for the the subject-matter of an application may authority whose decision is under attack be declared void and that where the to seek to evade the action by declaring contested decision has been rescinded an in its rectification that the latter "annuls action for a declaration that it is void and replaces" the decision which is the ceases to have any purpose. subject-matter of the action. Even if the result of the new decision was to allocate quotas lower than those In fact the only new element in the so- contained in the decision of 19 called "new decision" is that it contains December 1980 the applicant suffered no a statement of reasons which was wholly damage, according to the Commission, absent from the individual decision at since by 1 March its production figures issue. The applicant's action has not been were only 3 359 and 4 162 tonnes deprived of its purpose: obviously it respectively, and for the whole first concerns the contested decision as quarter of 1981 5 593 and 4 162 tonnes. amended. Far from having revoked its decision, the Commission has upheld it as far as the main objections thereto Moreover, the applicant has not chosen described in the application are to bring an action directed against the concerned. new decision within the period pre- scribed by Article 33 of the Treat)·.

The Commission does not contest that The Commission refers to the measures argument. which it has adopted in relation to imports from non-member countries, such as anti-dumping provisions, a Second submission: the alleged unlaw- system of Community controls and fulness of Decision No 2794/80/ECSC arrangements with a number of non- member countries. (a) Inadequate statement of reasons and infringement of Article 58 (1) and Artide 74 of the ECSC Treaty It is anxious to emphasize that the decision as to the extent to which it is necessary to adopt measures under The applicant claims that the wording of Anicie 74 is a question of policy. The Anicie 58 (1) and Article 74 of the soundness of the Commission's choice of Treaty is sufficient to show that any policy was demonstrated by a reduction application of Article 58 must necessarily in the level of imports. The complaint be accompanied by a consideration of directed at the Commission is one which "the need for measures provided for in may be raised only in an action for Article 74", and that that consideration failure to act. must be followed by a decision either to apply or not to apply Article 74 according to the "need" thus established. The applicant replies that the Commission may not apply Article 58 Since there is no mention whatsoever to without considering the need for the effect that such an examination was measures to be adopted under Article 74: conducted or of the reasons for the if it failed to consider the point it conclusions to which it led, the statement infringed Article 58; if it did not state in of the reasons for applying Article 58 is its decision that it had considered that inadequate. point it failed to fulfil its obligation to state reasons. The obligation to state reasons is interpreted strictly by the Since it was undoubtedly "necessary" to Coun precisely because the assessment adopt the measures provided for in of the situation is in pan discretionary Article 74, the failure to do so and thus escapes to some extent judicial constitutes an infringement of those two review. The obligation exists regardless anieles. The Commission's exercise of its of whether the decision is to apply the discretion is subject to review by the provisions or not to apply them. The Coun. explanations supplied by the Commission in its submissions to the Coun ought to The Commission contends that although have been given as the statement of in the case of measures adopted under reasons for the decision.

(b) Infringement of Article 58 (2) of those programmes, there was no reason the Treaty to allow it an adjustment under Anicie 4 (3). However, no discrimination was thereby created, either against "new" The applicant maintains that the quotas undertakings or against any other under- were not established "on an equitable taking which did not fulfil the conditions basis, taking account of the principles set laid down in that paragraph, as there out in Articles 2, 3 and 4" of the Treaty, was no different treatment of under- as provided for in Article 58 (2): the takings which were in similar situations. provisions contained in Article 4 (3) of The treatment differed only inasmuch as Decision No 2794/80/ECSC are the situations of the undertakings discriminatory if they do not apply differed, and it was therefore wholly to undertakings whose voluntary justified. production programmes could not be calculated taking 1974 as a basis because their facilities were of more recent date Article 14 enables the disproportionate (the so-called "new" undertakings). losses which certain undertakings may Similarly Article 14 creates discrimi- have had to suffer as a result of the nation between viable undertakings and application of the general provisions of others. Moreover, the fixing of quotas Decision No 2794/80 to be mitigated. for such undertakings on the basis of The provision is in no way dis- actual production during the reference criminatory since any undertaking period rather than on the basis of experiencing exceptional difficulties may capacity must inevitably lead to discrimi- have its quotas adjusted on that ground. nation. If some undertakings do not experience such difficulties but remain "viable" there is no reason to allow them an adjustment under that article; in any The Commission contends that the basis case, it must be reiterated that the on which the quotas were established — exclusion of an undertaking from the the reference production for each under- benefit of that article does not constitute taking — was an equitable one. To that different treatment of similar cases, but basic system are added the provisions of different treatment of different cases. Article 4 (3), (4) and (5), the last sub- paragraph of Article 5 (2) and Article 14. The Commission does not share the view that it is discriminatory to base calcu- Article 4 (3), which enables the reference lations on actual production rather than production to be adjusted, was production capacity. introduced in order to avoid any injustice which might be incurred, owing Actual production is an objective, precise to the adoption of the three-year period and measurable criterion, whereas in Article 4 ( 1 ) , solely by certain under- capacity is a less specific concept and its takings which had participated in the application as the criterion, in preference voluntary delivery programmes and to actual production, might give rise to which satisfied certain other conditions. injustice.

Article 4 (3) could have corrected the The applicant replies that the quota injustice but three conditions were system requires undertakings to sacrifice inserted into it the sole aim of which was some of their production capacity. Such to confer an advantage on certain under- a sacrifice must be shared on an takings for which the provision was equitable basis by using existing "tailor-made". production capacity as a reference.

Taken as a whole, the conditions reveal The Commission's argument that a particularly serious lacuna in the case capacity is a vague concept which would of undertakings which had progressively give rise to considerable difficulty in introduced new plant after 1974 but application does not bear scrutiny. before 1 July 1978 and which, moreover, as a result of that, had a smaller period of reference and found themselves deprived of the possibility of choosing The Commission itself resorted to that the month in which production was concept for its own programmes, for highest.

JUDGMENT OF 3. 3. 1982 — CASE 14/81

(c) Infringement of the fourth and fifth administration to impose subsequently paragraphs of Article 14 of the penalties for failure to comply with a set ECSC Treaty and of the general of rules which were represented as principle of Uw relating to the having no binding effect. misuse of powers

The principle that legitimate expectations must be protected has been breached. As far as Article 14 is concerned, the Undertakings cannot expect the applicant claims that on the basis of

ALPHA STEEL v COMMISSION

Anicie 58, which requires the quotas to The applicant submits that the be established on an equitable basis, application of Anicie 4 (3) may well lead Anicie 14 could not be applied, in the to the fixing of quotas higher than case of undertakings with recently previous actual production. installed plant which were not yet established on the market, on the basis of The same ought to apply in the case of actual production: production capacity undenakings entitled to relief under must be taken as the sole criterion. Anicie 14 if it so happens that they experience "exceptional difficulties". The Commission contends that for the applicant and other undenakings it took account of the rate of utilization of the undenaking's capacity in assessing the IV — Oral procedure exceptional difficulties to which it might have been subject. However, the purpose of Decision No 2794/80/ECSC was to The applicant, represented by André restrict production in order to adapt it to Elvinger, and the Commission, the fall in demand, and therefore the represented by Michel van Ackere, adjustments allowed for in Anicie 14 of presented oral argument at the sitting on the decision could not, as a matter of 15 September 1981. principle, result in quotas in excess of the undenakings' previous production, and The Advocate General delivered his that principle was respected in the opinion at the sitting on 29 October decision of 24 February 1981. 1981.

4 By another individual decision, dated 24 February 1981, that is to say, after these proceedings had been commenced, the Commission withdrew the contested decision claiming that it had been in error in applying Article 4(3) to the applicant's case with the result that the reference production had been fixed at too high a level. In the new decision the reference production is fixed at a level which is not disputed by the applicant. It grants the applicant relief under Article 14 of the general decision which permits each under- taking's quotas to be adjusted if it appears that the restrictions on production or delivery entail exceptional difficulties for that undertaking. In fixing the production quotas, therefore, the Commission did not apply the rate of abatement to the reference production, with the result that the quota is equal to that production. The quotas fixed in that way are nevertheless lower than those fixed in the decision of 19 December 1980.

s Originally the application was directed against the decision of 19 Drccnr»«·' 1980, and sought the annulment of that decision on three grounds, tnr t.r\· of which was that the figures given by the Commission as the r r t r r r m r production did not correspond to the real production figures. They had bern increased, but it was impossible for the applicant to determine in what » a \ the adjustment had been effected.

ALPHA STEEL » COMMISSION

b After the Commission had adopted its decision of 24 February 1981 the applicant added a supplement to its reply, amending its conclusions to request that the decision of 19 December 1980 as amended on 24 February 1981 be annulled. The applicant abandoned the first ground of its application based on the inaccuracy of the figures given in the decision of 19 December 1980.

JUDGMENT OF 3. 3. 1982 — CASE 14/81

io The Court has held, in its judgments of 12 July 1957 (Joined Cases 7/56 and 3 to 7/57 Algera and Others [1957-58] ECR 39, at p. 56), 12 July 1962 (Case 14/61 Hoogovens [1962] ECR 253, at p. 272) and 13 July 1965 (Case 111/63 Lemmerz-Werke [1965] ECR 677, at p. 690), that the withdrawal of an unlawful measure is permissible, provided that the withdrawal occurs within a reasonable time and provided that the Commission has had sufficient regard to how far the applicant might have been led to rely on the lawfulness of the measure.

u In this case the applicant cannot be said to have relied upon the lawfulness of the decision, since it lodged an application for its annulment. It was also aware that the Commission considered that the applicant was not entitled to relief under the provisions of Article 4 (3) of Decision No 2794/80/ECSC, for in its pleadings it refers to correspondence exchanged on that point between itself and the Commission, which it knew to be in error.

i2 The delay on the part of the Commission in rectifying the mistake may be attributed, at least in part, to the fact that it had to process information concerning a large number of undertakings. The applicant has not shown in what manner it was adversely affected by the time which was allowed to elapse before 24 February 1981. In the light of all the above circumstances it would 3opear that the decision of 19 December 1980 was withdrawn within a reasonable time. This submission must therefore be rejected.

Second submission : Decision No 2794/80/ECSC is unhwful

ie In this connection it must be emphasized that the applicant has not adduced any evidence in support of its submission that the Commission misused its discretion. On the contrary, even before the introduction of the quota system, the Commission took steps to control the level of prices and the quantity of imports of steel products from non-member countries. In particular, it fixed basic prices, concluded arrangements with non-member countries and took supervisory action. At the time of the adoption of Decision No 2794/80/ECSC it further intensified that supervision and reviewed the basic prices. Moreover, according to the figures supplied by the Commission the level of imports fell between 1977 and 1979 and that tendency continued before and after the introduction of the quota system.

i7 Therefore the Commission cannot be accused of not having made sufficient efforts to combat imports from non-member countries, particularly as it must be borne in mind that in its negotiations with non-member countries the Commission faces considerable difficulties as a result of the fact that the Community is a net exporter of steel and that it is compelled to ensure the continuance of Community expons at the same time as it must attempt to limit impons into the Community; in the circumstances it had reason to fear that by taking non-negotiated restrictive decisions with regard to non- member countries it might provoke retaliatory measures on their part which would be detrimental to the general interest.

JUDGMENT OF 3. 3. 1982 — CASE W/81

ALPHA STEEL v COMMISSION

22 T h a t submission is unfounded. It should be observed that Article 58 (2) of the T r e a t y does not restrict the Commission's freedom t o choose the basis upon which the quotas may be equitably determined in a given economic situation. It follows from the explanations given during these proceedings that there are no reasonable grounds for denying that the Commission's choice of the criterion based on undertakings' actual production mav constitute an "equitable basis" within the meaning of Article 58 (2). Indeed, that criterion, as adjusted by Article 4 of Decision N o 2 7 9 4 / 8 0 , constitutes, in the first place, an objective basis of assessment which avoids the uncer- tainties inherent in determining a factor which is partly conjectural, such as production capacity; secondly, it enables total production to be reduced without altering the positions of the undertakings on the market as between each other.

23 The applicant maintains that it would be reasonable to adjust the respective market positions of undertakings subsidized by the State, with a high rate of utilization, outmoded plant and a large workforce, and other undertakings which strive to be efficient. It is not necessary to rule on the validity of that argument since Article 58 in not designed to compensate for distortions of competition attributable to State subsidies, for which the Commission has other means of action at its disposal.

24 Similarly, the Commission's adoption of the period between July 1977 and June 1980 as the reference period is not open to reproach. The fact that undertakings were allowed to have quotas calculated on the basis of their best performance during that period does not amount to discrimination against undertakings whose recent equipment was not fully in operation in July 1977. If the quotas thus allocated to them give rise to difficulty, such undertakings may submit a request to the Commission for an adjustment pursuant to Article 14 of the general decision. That article was specifically designed to provide relief; its usefulness and value are undeniable and it enables the effects of other provisions of the general decision to be adjusted as and when appropriate.

¡- This submission must be rejected. Article 4 (3) of Decision No 2794/80/ ECSC is designed to compensate for the disadvantages incurred by the undertakings to which it applies. That in no way constitutes a sanction against other undertakings and the provision may not therefore be considered to be in breach of the principle of nulla poene sine lege.

ALPHA STEEL v COMMISSION

JO Nor has the Commission offended against the principle of the protection of legitimate expectation. The undertakings which did not participate in voluntary delivery programmes could not reasonably expect to continue to enjoy, after the introduction of a quota system, the competitive advantage which they had had over undertakings which did participate in such programmes.

3i As far as Article 4 (4) of the general decision is concerned, the submission is untenable because the applicant does not claim, and could not claim, that it was entitled to an adjustment of its quota thereunder.

Third submission: the individual decision is null and void because it infringes the general decision, Decision No 2794/80/ECSC

>2 The applicant maintains that the Commission ought to have allowed it relief under Anicie 4 (3) of Decision No 2794/80/ECSC, which requires the undertaking to have participated from July 1977 to June 1980 in the Commission's delivery programmes and the programme for the undertaking to have been fixed with 1974 as a basis. According to the applicant, if that provision is to have any meaning, the delivery programmes for undertakings whose facilities were not, or were only partially, in operation in 1974 must be deemed to have been fixed with that year as a basis because their programmes were established by reference to the general situation in that sector of the industry for that year.

35 From the information supplied by the Commission it appears that the applicant used only a part of its quota for the first quarter of 1981. At the hearing the applicant argued that the quotas allocated would have an influence later on owing to the new system of quotas decided upon by the Commission for the period after June 1981, since the quotas were to be calculated in part on the basis of the quotas allocated under the old system. It therefore had an interest in retaining the right to as high a quota as possible in order to be able to take advantage of any improvement in the state of the market.

36 If in the future the market situation enables the applicant to produce and sell steel products in greater quantities it will be open to it to submit to the Commission a request for an adjustment under the rules in force and it will then be for the Commission to take a decision on that request in the light of all the facts at its disposal, including the applicant's utilization of its production capacity. In the circumstances, and as far as the period at issue is concerned, the Commission's refusal to allow the applicant a larger quota does not adversely affect the applicant.

37 Furthermore, by virtue of Anide 14 of the general decision quotas may be adjusted if the restrictions imposed cause an undertaking exceptional difficulty. In the present instance the fact that the applicant's actual production was very low throughout the period in question indicates thai the difficulties in which the applicant finds itself at present are in no way attribu- table to the restrictions imposed by the quota system. It must be added that the aim of Anicie 14 is not to enable undertakings to have their quotas for the future calculated on a fictitious basis.

42 It would appear equitable, therefore, for the Commission to pay that pan of the applicant's costs which might have been avoided if the Commission had given a proper statement of the reasons on which its first decision was based.

On those grounds,

THE COURT

hereby:

1. Dismisses the application.

OPINION OF MR REISCHL — CASE 14/81

Mr President, Article 4 of Decision N o 2794/80 Members of the Court, contains the methods for calculating the reference production figures on which the abatement is to be based. Paragraphs The action on which I am about to give (1) and (2) of that provision indicate the my opinion challenges the fixing of method for calculating the actual production quotas for the first quarter of production during the reference period, 1981 pursuant to Commission Decision whilst paragraphs (3), (4) and (5) govern No 2794/80/ECSC of 31 October 1980, the circumstances in which the actual establishing a system of steel production reference production figures may be quotas for undertakings in the iron and adjusted. Thus paragraph (3) provides as steel industry (Official Journal, L 291, follows: 31. 10. 1980, p. 1), and Commission Decision No 3381/80/ECSC of 23 December 1980 (Official Journal, L 355, 30. 12. 1980, p. 37), fixing the rates of abatement for the period in "However, if during the period from question. As the Court is acquainted with July 1977 to June 1980, the average rate the svstem of production quotas, I may of utilization of the production facilities confine my remarks to a recapitulation of an undertaking was 10 percentage of the provisions which are relevant to points or more below the average rate of thi present case. utilization of the same facilities of the

I — Translated from »it German.