C-111/81
ECLI:EU:C:1982:77
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J U D G M E N T OF T H E C O U R T 3 MARCH 1982 '
Alpha Steel Ltd v Commission of the European Communities (System of production quotas for steel)
Case 111/81
In Case 111/81
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), I — Language of lhe Caic: French.
JUDGMENT OF 3. 3. 1982 — CASE 111/81
THE COURT
composed of: J. Menens de Wilmars, President, G. Bosco, A. Touffait and O. Due (Presidents of Chambers), P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe, T. Koopmans, U. Everling, A. Chloros and F. Grévisse, Judges,
Advocate General: G. Reischl Registrar: P. Heim
gives the following
JUDGMENT
Facts and Issues
The facts of the case, the course of the Article 3 provides that the Commission is procedure and the submissions and to fix quarterly production quotas "for arguments of the parties may be each undertaking" on the basis of the summarized as follows: reference production figures of that undertaking as referred to in Article 4, by application of abatement rates to these reference production figures as I — Facts and procedure referred to in Article 5.
In paragraphs (1) and (2) of Article 4 The background to the dispute general rules are laid down for establishing the quarterly reference production figures for both rolled By Decision No 2794/80/ECSC of products and crude steel. The provisions 31 October 1980 (Official Journal 1980, read as follows: L 291, p. 1) the Commission established a system of steel production quotas for "(1) For each month of the relevant undertakings in the iron and steel quarter, reference shall be made to industry. the same month during the period from July 1977 to June 1980 during Article 2 of that decision provides that which the total production of the the Commission is to fix quarterly four groups of rolled products was production quotas for crude steel and for the highest. The three months thus the four groups of rolled products chosen, which will not necessarily described in the same article and, in be consecutive, shall constitute the more detail, in Annex 1 to the decision. reference period..
ALPHA STEEL v COMMISSION
(2) The reference production figures Provided that during that year all or part shall be the same, for crude steel of the undertaking's facilities were not and for each of the other groups of on stream." rolled products, as the production of the corresponding items during Article 6 excludes certain products from the reference period." the quota system.
Paragraphs (3), (4) and (5) of Article 4 By virtue of Anicie 14 of the decision an describe the special circumstances in undertaking may, if the restrictions which the reference production figures imposed entail exceptional difficulties for and, hence, the quotas, are to be it, refer the matter to the Commission. increased. Article 4 (4) provides that the The Commission may then adapt the reference production may be adapted in provisions of the decision. the case of an undertaking which, further to an investment programme duly reported and not the subject of an un- By Decision No 664/81/ECSC of favourable opinion by the Commission, 13 March 1981 (Official Journal 1981, has activated a new plant after 1 July L 69, p. 22) the Commission fixed the 1980 which brings the total production rates of abatement for the second quarter capacity for the four groups of products of 1981. to a level exceeding by at least 15% the total production capacity available for The Commission fixed the applicant's 1979. production quotas for the second quarter of 1981 by an individual decision dated 6 April 1981 communicated to the Anicie 4(3) provides as follows: applicant in a letter received on 9 April 1981. ". . . if during the period from July 1977 to June 1980, the average rate of The quota for items comprised in Group utilization of the production facilities of 1, namely hot-rolled wide and narrow- an undertaking was 10 percentage points strip, was fixed, after application of the or more below the average rate of abatement rate of 35.62% to the utilization of the same facilities of the reference production which was 80 803 other undertakings of the Community, tonnes, at 52 021 tonnes and the quota during the years 1977, 1978 and 1979, for crude steel was fixed after application the Commission shall increase the of the same abatement rate to a reference production figures for this reference production of 53 497 tonnes at undertaking to a level which corresponds 34 441 tonnes. to a rate of utilization which lies five percentage points below that average rate in the other undertakings: II — P r o c e d u r e Provided the undertaking undertook to comply from July 1977 to June 1980 The application was lodged on 8 May with the delivery programme established 1981. The written procedure followed by the Commission, and the normal course.
Provided that programme for this The applicant requested that this case be enterprise was fixed taking 1974 as a joined with Case 14/81. The defendant basis, and opposed the request.
JUDGMENT OF 3. 3. 1982 — CASE 111/81
On hearing the report of the Judge- application of Article 58 must necessarily Rapporteur and the views of the be accompanied by a consideration of Advocate General, the Court decided to the "need for the measures provided refuse the request for the cases to be for in Article 74", and that that joined, and to open the oral procedure consideration must be followed bv a without any preparatory inquiry. decision either to apply or not to apply Article 74 according to the "need" thus established. III — Conclusions of the parties Since there is no mention whatsoever to the effect that such an examination was The applicant claims that the Court conducted or of the reasons for the should: conclusions to which it led, the statement of the reasons for applying Article 58 is inadequate. Declare void the decision dated 6 April 1981 whereby the Commission fixed steel production quotas for the applicant for Since it was undoubtedly "necessary" to the second quarter of 1981 pursuant to adopt the measures provided for in Commission Decision No 2794/80/ Article 74, the failure to do so ECSC of 31 October 1980 establishing a constitutes an infringement of those two system of steel production quotas for anides. The Commission's exercise of its undertakings in the iron and steel discretion is subject to review by the industry; and Court.
Order the Commission of the European The Commission contends that although Communities to pay the costs. in the case of measures adopted under Article 74 (3) the statement of reasons The Commission contends that the Court must indicate that the conditions laid should: down in Article 58 are satisfied, Article 58 contains no such reference to the Dismiss the application as unfounded; existence of the conditions provided for in Article 74 and there was therefore no need to refer to Article 74 in the Order the applicant to pay the costs. statement of reasons for Decision No 2794/80/ECSC, which was adopted pursuant to Article 58. IV — Submissions and arguments of the parties The Commission refers to the measures which it has adopted in relation to imports from non-member countries, First submission: the alleged unlawfulness such as anti-dumping provisions, a of Decision No 2794/80/ECSC system of Community controls and arrangements with a number of non- (a) Inadequate statement of reasons and member countries. infringement of Article 58(1) and Article 74 of the ECSC Treaty It is anxious to emphasize that the decision as to the extent to which it is The applicant claims that the wording of necessary to adopt measures under Article 58 (1) and Article 74 of the Article 74 is a question of policy. The Treaty is sufficient to show that any soundness of the Commission's choice of
ALPHA STEEL v COMMISSION
policy was demonstrated by a reduction (b) Infringement of Article 58 (2) of the in the level of imports. The complaint Treaty directed at the Commission is one which may be raised only in an action for failure to act. The applicant maintains that the quotas were not established "on an equitable basis, taking account of the principles set out in Anieles 2, 3 and 4" of the Treaty, The applicant replies that the as provided for in Article 58(2): the Commission may not apply Article 58 provisions contained in Article 4 (3) of without considering the need for Decision No 2794/80/ECSC are measures to be adopted under Article 74: discriminatory if they do not apply if it failed to consider the point it to undertakings whose voluntary infringed Article 58; if it did not state in production programmes could not be its decision that it had considered that calculated taking 1974 as a basis because point it failed to fulfil its obligation to their facilities were of more recent date state reasons. The obligation to state (the so-called "new" undertakings). reasons is interpreted strictly by the Similarly Article 14 creates discrimi- Court precisely because the assessment nation between viable undertakings and of the situation is in part discretionary others. Moreover, the fixing of quotas and thus escapes to some extent judicial for such undertakings on the basis of review. The obligation exists regardless actual production during the reference of whether the decision is to apply the period rather than on the basis of provisions or not to apply them. The capacity must inevitably lead to discrimi- explanations supplied by the Commission nation. to the Court ought to have been given as the statement of reasons for the decision.
The Commission contends that the basis on which the quotas were established — The Commission replies that the the reference production for each under- applicant has failed to show that taking — was an equitable one. To that measures other than those adopted were basic system are added the provisions of necessary. Even if it had, such a matter Article 4 (3), (4) and (5), the last sub- could only be considered in an action for paragraph of Article 5 (2) and Article 14. failure to act on the part of a Community institution. Article 4 (3), which enables the reference production to be adjusted, was intro- duced in order to avoid any injustice Consideration of whether the adoption which might be incurred, owing to the of measures under Anicie 74 is necessary adoption of the three-year period in is not a prerequisite to the taking of Article 4 (1), solely by certain under- action by the Commission under Article takings which had participated in the 58; nor is it one of the "elements of fact voluntary delivery programmes and constituting the legal basis" for Decision which satisfied certain other conditions. No 2794/80/ECSC, nor "one of the considerations which led to its adoption 'by the Commission' ". Therefore there was no need to refer to it in the Since the applicant did not satisfy all the statement of the reasons on which that conditions which had been laid down (as decision was based. was stated in the first paragraph of the
JUDGMENT OF 3. 3. 1982 — CASE 111/81
preamble to the decision of 24 February Furthermore, to calculate the quotas on 1981), although it had participated in the basis of the capacity of the under- those programmes, there was no reason takings would inevitably penalize those to allow it an adjustment under Article 4 which have a very high rate of utilization (3). However, no discrimination was as a result of efficient management and thereby created, either against "new" would confer an unfair advantage on undertakings or against any other under- those with a low rate of utilization. taking which did not fulfil the conditions laid down in that paragraph, as there was no different treatment of under- takings which were in similar situations. The treatment differed only inasmuch Article 4 (3) seeks to rectify an injustice as the situations of the undertakings whereby a disadvantage would have been differed, and it was therefore wholly suffered by undertakings which, having justified. agreed to take part in voluntary programmes restricting deliveries based on deliveries in 1974, had not yet that year brought their new plant into operation. Article 14 enables the disproportionate losses which certain undertakings may have had to suffer as a result of the application of the general provisions of Decision No 2794/80 to be mitigated. "New" undertakings, such as the appli- The provision is in no way discrimi- cant, which are not covered by Article 4 nator)' since any undertaking experienc- (3) may however take advantage of other ing exceptional difficulties may have its provisions of Decision No 2794/80/ quotas adjusted on that ground. If some ECSC which are also designed to ensure undertakings do not experience such equal treatment, such as Article 14. The difficulties but remain "viable" there is applicant's problem was different to that no reason to allow them an adjustment envisaged by Article 4 (3), namely a under that aniele; in any case, it must be utilization rate so low that it created reiterated that the exclusion of an under- exceptional difficulties for it within the taking from the benefit of that aniele meaning of Article 14. The decision or does not constitute different treatment of 24 February 1981 recognized thai similar cases, but different treatment of circumstance. different cases.
The applicant replies that the quoti The Commission does not share the view system requires undertakings to sai rifu r that it is discriminatory to base cal- some of their production capacitv Such culation on actual production rather than a sacrifice must be shared on an production capacity. equitable basis by using exm.nj production capacity as a referen«
Actual production is an objective, precise and measurable criterion, whereas capacity is a less specific concept and -its The Commission's argumeni that application as the criterion, in preference capacity is a vague concept which %ouid to actual production, might give rise to give rise to considerable difficult* in injustice. application does not bear scrutin*
ALPHA STEEL v COMMISSION
The Commission itself resorted to that reduction in each undertaking's pro- concept for its own programmes, for duction compared with its previous pro- instance the quarterly estimated duction so as to adjust Community programmes, and for the application of production to the reduced demand. the system of voluntan' reduction Actual production, which is represented programmes to undertakings which were by tangible objects, is less difficult to not producing in 1974. Production ascertain than production capacity. capacity should not prove more difficult to ascertain than actual production. The Commission explains how it relied on the notion of capacity in limited Moreover, it was not the undertakings circumstances in the past. It is preferable with modern plant and efficient to use information on actual production management which were exploiting their or actual deliveries where it is available. capacity to the full but those with outmoded, labour-intensive plant and the benefit of government subsidies. Those The applicant's delivery programmes undertakings, held out as good examples were based on a presumed gradual by the Commission, were in reality increase in the utilization of its capacity responsible for the deteriorating until full utilization, which was expected conditions in the steel industry. to be achieved by the last quarter of 1979. The applicant's deliveries in 1979 and the first half of 1980 amounted to The applicant complains that the no more than about 50 % of what it reference system creates injustices, the could have delivered. most patent of which is the penalization of undertakings having a very low rate of utilization of their capacity. As far as undertakings working at full capacity are concerned, the Commission Anicie 4 (3) could have corrected the considers that the more plausible view is that they are doing so because they injustice but three conditions were manufacture a sufficiently wide range of inserted into it the sole aim of which was products which are of the quality to confer an advantage on certain under- required by users and were adapted in takings for which the provision was time to changing market trends. "tailor-made".
Taken as a whole, the conditions reveal (c) Infringement of the fourth and fifth a particularly serious lacuna in the case paragraphs of Article 14 of the of undertakings which had progressively ECSC Treaty and of the general introduced new plant after 1974 but principle of law relating to the before 1 July 1978 and which, moreover, misuse of powers as a result of that, had a smaller period of reference and found themselves deprived of the possibility of choosing The applicant objects to the fact that the month in which production was relief under Article 4 (3) is tied to the highest. undertaking's participation on a voluntary programme to reduce pro- duction. The result is to confer ex post The Commission insists that the sacrifice facto a binding character on measures required by the quota system is a which were not binding and could not be
JUDGMENT OF 3. 3. 1982 — CASE 111/81
so, thus offending against the principle not compulsory. If an undertaking chose nulla poena sine lege. to ignore an unfavourable opinion of the Commission on an investment it accepted the risks which it might indirectly incur as a result of a situation which it had itself helped to create. The fact that the The Commission replies that confining Commission takes account of that and the benefit of Article 4 (3) to certain decides to ignore the resulting increase undertakings which are the victims of an in capacity' in no way amounts to the injustice does not amount to a sanction imposition of a penalty connected to a applied against other undertakings. Since measure which is without binding force. there was no sanction there was no breach of the principle nulla poena sine lége. The Commission is unable to see how the provision in question infringes the fourth and fifth paragraphs of Article Second submission: the contested decision 14 of the ECSC Treaty. is null and void for infringement of Decision No 2794/80/ECSQ in particular Article 4 (3) and Article 14 thereof
The applicant replies that the breach lies in haying conferred a binding character on measures which were not binding. The applicant maintains that Article 4 (3) Contrary to the rule that opinions are imposes two contradictor)' and incom- not binding and that measures involving patible conditions. If the paragraph is to a legal obligation must be adopted in have any meaning, the delivery a particular form, the Commission programme for the period between July transformed, ex post facto, into binding 1977 and June 1980 in the case of under- decisions with obligatory consequences takings whose plant was not, or was only acts which were not binding, namely the partially, in operation must be unfavourable opinion (Article 4 (4) of considered to have been fixed on the Decision No 2794/80) and the delivery basis of the general situation in that programme (Article 4 (3)). sector of the industry in 1974. The Commission had no grounds, therefore, for refusing to apply Article 4 (3).
The principle that legitimate expectations must be protected has been breached. Undertakings cannot expect the adminis- The Commission points out that in tration to impose subsequently penalties drawing up the voluntary delivery for failure to comply with a set of rules programmes taking 1974 as a basis it had which were represented as having no regard, for all undertakings, to deliveries binding effect. during that year, and not to the under- takings' capacity or production. In any case the applicant did not participate in the delivery programmes from July 1977 The Commission considers that the to June 1980, but did so only from the submission concerning breach of the third quarter of 1978. As a result the fundamental principle that legitimate condition referred to in the first indent expectations must be protected is un- of Article 4 (3) was not fulfilled and the founded. The delivery programmes were paragraph could not in any case apply.
ALPHA STEEL v COMMISSION
The applicant replies that the conditions The applicant submits that the in question are unlawful and discrimi- application of Article 4 (3) may well lead natory and that the Commission must to the fixing of quotas higher than apply paragraph (3) without requiring previous actual production. the conditions to be fulfilled. The same ought to apply in the case of undertakings entitled to relief under As far as Article 14 is concerned, the Article 14 if it so happens that they applicant claims that on the basis of experience "exceptional difficulties". Article 58, which requires the quotas to be established on an equitable basis The Commission considers that the aim Anicie 14 could not be applied, in the of the applicant's observations is to case of undertakings with recently refute the Commission's submissions in installed plant which were not yet quite another matter. Article 14 is a relief established on the market, on the basis of clause and does not lay down detailed actual production: production capacity rules, as is evident from its application in must be taken as the sole criterion. the case of Alpha Steel, which was allowed an adjustment for the first quarter of 1981 and not for the second quarter. The Commission contends that for the applicant and other undertakings it took account of the rates of utilization for the undertaking's capacity in assessing the V — 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, represen- the fall in demand, and therefore the ted by Michel van Ackere, presented oral adjustments allowed for in Article 14 of argument at the sitting on 15 September the decision could not, as a matter of 1981. principle, result in quotas in excess of the undertakings' 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.
Decision
1 By application lodged at the Court Registry on 8 May 1981 Alpha Steel Ltd, a company incorporated under English law, brought an action under the second paragraph of Article 33 of the ECSC Treaty for a declaration that the Commission's individual decision of 6 April 1981 fixing the applicant's production quotas for the second quarter of 1981 pursuant to Commission Decision N o 2 7 9 4 / 8 0 / E C S C of 31 October 1980 (Official Journal 1980, L 291, p. 1) is void.
JUDGMENT OF 3. 3. 1982 — CASE 111/81
2 In support of its inital submission that Decision No 2794/80 is unlawful, the applicant argues that the Commission ought to have considered whether it was necessary to take action in the field of commercial policy under Article 74 of the ECSC Treaty when it was examining the possibility of introducing a quota system. It submits further that the general decision is incompatible with Article 58 (2) of the ECSC Treaty, which requires that quotas be established "on an equitable basis". The applicant also complains of the fact that the reference period used in the general decision runs from July 1977 to June 1980 and criticizes the provisions of Article 4 (3) of that decision; it claims that those provisions were intended to benefit a particular undertaking and that they discriminate against new undertakings. Finally, the applicant takes exception to the fact that the benefit of Article 4 (3) is restricted to undertakings which participated in a voluntary delivery programme; that is said to be in breach of the principle of nulla poena sine lege and the principle of the protection of legitimate expectation.
3 In its second submission the applicant maintains, with regard to the individual decision of 6 April 1981, that the Commission ought to have allowed it relief under Article 4 (3) of the general decision, which requires the undertaking to have participated from July 1977 to June 1980 in the Commission's delivery programmes and the programmes for the undertaking to have been fixed with 1974 as a basis. The applicant also considers that the Commission ought to have applied Article 14 of the general decision on the basis of production capacity, rather than actual production, and that it ought to have allowed it a larger quota.
< The submissions described above are the same in substance as those put forward by the applicant in Case 14/81, which concerns an application for the annulment of the Commission's decision fixing the applicant's quotas for the first quarter of 1981. The points of law considered in Case 14/81 are identical to those which have been raised in these proceedings.
s In a judgment delivered this day the Court has examined those submissions and rejected them as unfounded. On the same grounds the present application must also be dismissed.
ALPHA STEEL v COMMISSION
Costs
6 Anicie 69 (2) of the Rules of Procedure provides that the unsuccessful party is to be ordered to pay the costs.
7 Since the application has failed in its submissions, it must be ordered to pay the costs.
On those grounds,
T H E COURT
hereby:
1. Dismisses the application;
2. Orders the applicant to pay the costs.
Menens de Wilmars Bosco Touffait
Due Pescatore Mackenzie Stuan O'Keeffe
Koopmans Everting Chloros Grévisse
Delivered in open court in Luxembourg on 3 March 1982.
P. Heim J. Menens de Wilmars Registrar President