C-244/81

In Case 2 4 4 / 8 1

KxöCKNER-WERKE A G , a steel undertaking having its registered office in Duisburg, represented by Professor Bodo Borner, of C o l o g n e University, with an address for service in Luxembourg at t h e Chambers of Ernest A r e n d t , 34 B R u e Philippe-Il,

applicant, v

C O M M I S S I O N OF T H E EUROPEAN C O M M U N I T I E S , r e p r e s e n t e d by its Legal Adviser, N o r b e r t K o c h , acting as Agent, assisted by Professor Eberhard Grabitz of the Free University of Berlin, with an address for service in L u x e m b o u r g at the office of Oreste M o n t a k o , a member of its Legal D e p a r t m e n t , Jean M o n n e t Building, Kirchberg,

defendant,

A P P L I C A T I O N requesting t h e C o u r t t o declare void the notification of 28 July 1981, as a m e n d e d by the notification of 31 August 1981, whereby t h e Commission fixed t h e applicant's reference-production levels a n d reference

JUDGMENT

Facts and Issues

The facts of the case, the course of the Journal L 291, p. 1) establishing a system procedure and the conclusions, sub- of steel production quotas for under- missions and arguments of the parties takings in the Community's iron and may be summarized as follows : steel industry until 30 June 1981.

I — Facts Nevertheless, demand for the main types of steel product continued to decline and Taking the view that the European steel the slight increase in prices proved industry was facing a manifest crisis insufficient, in view of the financial within the meaning of Article 58 of the burdens borne by the undertakings; it ECSC Treaty and that the means of thus became clear towards the middle of indirect action at its disposal had proved 1981 that the European iron and steel ineffective or insufficient to deal with it, industry was still facing a period of the Commission adopted, for the manifest crisis and that the attainment of purposes of re-establishing the balance the objectives under Article 3 of the between supply and demand, Decision ECSC Treaty was being seriously 2794/80 of 31 October 1980 (Official jeopardized.

KLÖCKNER-WERKE v COMMISSION

JUDGMENT OF 11. 5. 1983 — CASE 244/81

and narrow strips, reversing mill production by invoking the abate- plate and wide flats, heavy sections ment rates in force during the (sheet piling, side-flanged beams, quarters in question; other beams and other sections, permanent-way material) ; light sections (coiled wire rod, concrete- The ratios between the reconstituted reinforcing bars and other merchant reference production and the bars)] was the highest; the 12 reference production established in calendar months thus chosen need pursuance to Article 4 (1) of the not be consecutive; above-mentioned decision are to constitute the correction factors; The period of 12 months from July 1979 to June 1980. The average of these correction factors is to be applied to the reference production calculated in However, if production for 1974 is accordance with the above- less than that of the 12 best months mentioned Article 4 (1) in respect of referred to in the second indent the second and third quarter of 1981 above, that figure is to be replaced to establish the corrected reference by the latter. The same is to be done production for those quarters; in regard to the production for the period from July 1979 to June 1980 if, during the period, an undertaking The sum total of the reconstituted has suffered more than 30 con- reference production for the fourth secutive days of strikes. quarter of 1980 and the first quarter of 1981 and the corrected reference production for the second and third (b) The second figure gives an annual quarter of 1981 is to constitute the reference resulting from the corrected annual production; production quotas granted under Decision 2794/80 during the fourth quarter of 1980 and the first quarter Such corrected annual reference of 1981. production is to be further corrected for the products exempted by the decision by deducting a proportion The second figure is to be calculated equal to that which those products as follows: represented in the reference production for the 12 best months.

Category I a , 1.110 for Category I b, application to its reference production of 1.033 for Category I c and 1.075 for the percentage of its deliveries on the Category I d. common market compared with its total production during the period of the 12 best months. Division of those results by the production of hot-rolled wide and narrow strip in the same 12 best Under Article 9(1) the Commission is to months yields coefficients which are fix, each quarter, the abatement rates for to be used to derive from the establishing the production quotas and reference production established for the part of those quotas which may be the products of Category I the delivered on the common market. reference production for the derived products expressed in coil weight. Such reference production is then to Under Article 9 (2) the Commission is to be expressed as weights of derived notify to each undertaking its reference products by application of the production and reference quantities as conversion coefficient. well as its production quotas and the part of those quotas which may be delivered on the common market.

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made to Article 13 which provides for an The abatement rates for the derived adjustment of the reference production products of Category I were as follows : figures of an undertaking which, as the result of a properly-declared investment Abatement rates for the estab- programme on which the Commission Abatement rates lishment of the part has not delivered a negative opinion or for the estab- of the production lishment of quotas deliverable which was not subject to the obligation production quotas in the common to declare it but for which the market Commission considers that it would not have entailed delivering such an opinion, Category I a 27% 31% brings new rolling mills or new Category I b 28 % 36 % conversion lines into operation; similarly, Article 14 was replaced by a new Category I c 17 % 23 % provision under which the Commission Category I d 0% 0% makes an appropriate adjustment to the reference production of any undertaking which is caused exceptional difficulties In application of Articles 5 and 9 (2) of by the quota system on account of the Decision 1831/81, the Commission, in a scale of the abatement rates imposed for letter to 28 July 1981, notified Klöckner- any given quarter. Werke AG, whose registered office is in Duisburg, of its reference production In pursuance of Article 9 (1) of Decision figures and reference quantities for the 1831/81, the Commission adopted third quarter of 1981, together with its Decision 1833/81 of 3 July 1981 production quotas and that part thereof (Official Journal L 184, p. 6) fixing the which might be delivered in the abatement rates for the third quarter of Common Market. The figures thus fixed 1981. were as follows:

Having partially amended its conclusions in its reply, the applicant claims that the II — W r i t t e n p r o c e d u r e Court should:

Declare the defendant's decisions of 28 Pursuant to Articles 33 and 36 of the July and of 31 August 1981 null and ECSC Treaty, Klöckner-Werke AG void. brought an action on 8 September 1981, whereby it sought to have the In the alternative: Commission's communications of 28 July and 31 August 1981 declared void. (a) declare the production quotas laid down by the contested decisions void The written proceedings followed the in so far as they fall short of the normal course. following quantities: For Category I a 286 000 tonnes; In reply to an inquiry of 8 July 1982, the applicant informed the Court on 27 July For Category I b 340 000 tonnes; that, owing to its special circumstances of fact and of law, it wished to pursue its (b) declare the production quota for application despite the Court's verdict of Category I a void in so far as it 7 July 1982 in Case 119/81 between the covers cold-rolled plate of 3 same parties. millimetres and over;

In reply to an inquiry of 17 August 1982, (c) declare the production quotas void in the applicant pointed out to the Court so far as it may be shown that on 9 September 1982 the special features poduction is intended for non- distinguishing its application from Case member countries; 119/81 and the reasons justifying it in pursuing the reasoning and arguments (d) declare the contested decisions void, adduced in support. in so far as they determine the part of the production quotas which may be delivered in the common market; Upon hearing the report of the Judge- Rapporteur and the views of the Advocate General the Court decided to Order the defendant to pay the costs.

The Commission contends that the Court aggravates its situation: under Decision should: 2794/80, the average utilization rate of hot-rolled wide strip mills within the (a) dismiss the application; Community stood at 52%, that of the applicant at 39%, whereas, under Decision 1831/81, the average utilization (b) order the applicant to pay the costs. rate was 4 8 % but that of the applicant 29.6%. The disparity between the applicant's utilization of its hot-rolling IV — Submissions and arguments mills and the average utilization of mills of t h e p a r t i e s within the Community therefore increased from 13 to 18 percentage points. A — Main claim The reason for that was that the method The applicant supports its main claim by of determining reference production laid a number of submissions and arguments, down by Decision 1831/81 halves the — directed both against general Decision already inadequate — increase in the 1831/81 as amended by Decision applicant's reference production under 1832/81 and against the individual Decision 2794/80. Under Article 6 (1) of decisions of 28 July and 31 August 1981, Decision 1831/81 reference production which allegedly demonstrate the is the arithmetical mean between the unlawful nature of the general decision. reference production calculated in accordance with Decision 2794/80 and The Commission rejects all such actual output during certain periods in submissions and arguments. the past, without any increase comparable to the one provided for by Article 4 (3) of Decision 2794/80. Principle of minimum utilization of capacity Whereas the Commission reduced the average utilization of Community The applicant alleges that the last rolling-mills by four percentage points, it sentence of the first subparagraph, and also reduced by 9.4 points the utilization the second subparagraph, of Article 58 rate — which was previously extremely (2) of the ECSC Treaty show that a poor in any case — of the applicant's system of production quotas must enable Bremen No II hot-rolled wide strip mill, employment to be maintained as far as instead of bringing it into line with the possible. The threat to employment Community average. increases, it argues, in inverse proportion to the utilization of capacity; the quota By so doing, the Commission, the system should therefore, if need be, applicant claims, exceeded its margin of provide for quotas to be raised to a level discretion, misused its powers, and of minimum utilization of productive infringed the Treaty. capacity corresponding to the average within the Community. (b) The Commission wrongly supposes that the utilization rate of the applicant's (a) Production quotas allotted to the rolling-mill in Bremen stands at 50.6% applicant on the basis of Decision of capacity, whereas in fact the 2794/8Ö were, it alleges, discriminatory productive potential is being exploited and hence unlawful because they were so only to the extent of 39% of actual low, and Decision 1831/81 considerably capacity. The Commission assumes

maximum productive capacity to be no (c) Furthermore, the Commission has more than 355 000 tonnes per month, taken no account of the productive po- whilst the mill's potential actually tential of the Bremen No I rolling-mill. amounts to 459 000 tonnes. That is the The latter was more or less taken out of figure disclosed by the Technical Audit commission in 1974, as part of the re- Report, drawn up jointly on 1 May 1981 structuring measures promoted by the by the Belgian Centre des Recherches Commission. Its output potential Métallurgiques [Centre for Metallurgical amounts to 169 000 tonnes per month; Research] and the Japanese Kawasaki the applicant's productive capacity is

That objective is A possible infringement of Article 14 of attainable only by a proper utilization of Decision 22/66 of the High Authority of productive capacity; a lesser utilization the ECSC of 16 November 1966 on of an undertaking's capacity involves information to be furnished by under- lower returns, which has repercussions takings about their investments (Official on the maintenance of employment. If Journal, English Special Edition 1965- the economic situation calls for sacrifices 1966, p. 280) might, where appropriate, in the matter of employment, such warrant imposing a fine, but not holding sacrifices should be distributed fairly.

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In order to accomplish its mission the terms of the degree to which capacity is Commission should use the quota system utilized that the threat to employment to set up a minimum utilization rate, must be perceived. based on current — not past — capacity. Such minimum utilization may be neither higher nor lower than the average. The (e) Decision 1831/81 contains no applicant's plant should be run at least at specific reason such as might justify the the average rate indicated by utilization aggravation of the applicant's situation; as calculated from the reference it is vitiated by a flagrant infringement of production figures under Decision an essential procedural requirement, in 1831/81. the form of a total absence of stated reasons.

KLÖCKNER-WERKE v COMMISSION

The crisis-management provisions of inconsistent with Article 58 (2) of the Article 58 of the ECSC Treaty do not ECSC Treaty is therefore indefensible authorize the Commission to restructure from the outset, at the legal level. Since production, but simply to adapt it to the the provision in question does not decline in demand. The Commission's involve an obligation, in the context of duty is to ensure that such adaptation is the establishment of the quota system, to equitable, that is to say, that it operates achieve an identical level of utilization as uniformly as possible for all under- rates within the Community by means of takings. a restructuring of capacities imposed from above or by general measures, it follows that the assertion that the b) Raising the rate of utilization of capacity of the applicant's No II hot- output capacity is not permissible except rolling mill for wide strip was greater in strictly limited cases and in special than the Commission had supposed is circumstances warranting a departure quite irrelevant in the circumstances. from the rule that reductions in production must be distributed evenly on the basis of the status quo of under- takings' actual production. Thus, in the (d) The arguments put forward by the context of Decision 2794/80, the applicant on the basis of a comparison of applicant itself benefited from an the utilization rate of its No II mill with exceptional increase in its reference the average utilization rate of hot-rolled production, which is also having reper- wide strip mills within the Community cussions in connection with the new cannot be accepted, by reason of the quota system under Decision 1831/81. actual legal principles on which they are founded.

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KLÖCKNER-WERKE v COMMISSION

conduct upon it. Yet the Commission has The applicant argues that the determi- taken no action, in pursuance either of nation of the quotas in pursuance of Article 4 (c), of Article 67 or of Article Decision 1831/81 does not rest "on an 88. What is more, it does not intend to equitable basis" within the meaning of have regard to the prohibition of Article 58 of the ECSC Treaty: the subsidies when distributing the quotas, Commission should have corrected the whereas Article 58 requires it, when negative effects of subsidies granted, in establishing the quotas, to take account contravention of the Treaty, to the steel of any subsidies granted, cither by industries in several Member States. allowing undertakings which have not infringed Article 4 (c) of the Treaty a "bonus" in the form of higher quotas, or (a) The first subparagraph of Article 58 by inflicting on subsidized undertakings (2) enjoins the Commission to take a "malus" deducted from the quotas account "of the principles set out in which would normally have to be Articles 2, 3 and 4" of those provisions, granted in pursuance of the general the prohibition of subsidies contained in rules. Article 4 (c) is of prime importance to the existence of the common market, and The Commission docs not contest that requires scrupulous compliance, in Member States grant subsidies to under-

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(a) To the extent to which such a system of production quotas, set up by subsidies relate to general aid for the virtue of Article 58: all that the benefit of the metallurgical industry, they Commission has at its disposal for do not fall within the ambit of Article 4 enforcing the prohibition of subsidies in (c) of the ECSC Treaty. Such aids Article 4 (c) is the procedure described in should be viewed in the light of Article Article 88 of the ECSC Treaty, which 67, since they are assigned to the requires it, whenever the prohibition of preserve of the general exercise by subsidies is infringed, to proceed against Member States of the powers retained by the relevant Member State in the manner them in the fields of economic, provided for in cases of contravention of industrial, regional, fiscal and social the Treaty. policy. Article 67 of the ECSC Treaty does not forbid the grant of general aids such as those; it confined itself to setting The introduction of penalties in up a procedure for counteracting the connection with the prohibition of positive or negative repercussions of subsidies is not permitted in the context those measures on undertakings. of the construction of the quota system.

KLÖCKNER-WERKE v COMMISSION

certain undertakings. None the less, it is assigned that mission to the ECSC. In forbidden to go any further and to take any event, restoring such a balance is account, for example, of any distortions achieved not only by affecting supply, in competition in the context of the which does lie within the Commission's quota system: for that purpose, it is the powers, but also by affecting demand, procedure laid down in Article 88 of the which does not. The sole aim of the Treaty which must be applied when ECSC is to contribute to restoring the distortion in competition takes the form balance between supply and demand by of paying a subsidy forbidden by virtue affecting supply, using the means of Article 4 (c) of the Treaty. provided by Article 58 of the Treaty, which makes only production quotas — not delivery quotas — available to it. (e) The establishment of a "malus" or of a "bonus" of quotas as part of the system of production quotas under (b) The Member States have Article 58 of the ECSC Treaty may be recognized the possibility of the founded only on the premise that Community's taking action with regard subsidies forbidden by Article 4 (c) of to deliveries, in particular in the field of the ECSC Treaty continue to be paid; steel-making, but in Article 58 of the the application of one Treaty provision ECSC Treaty they deliberately specified cannot, however, depend on the only production quotas, not delivery infringement of another provision quotas. thereof.

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never contemplated by the Treaty, production. Decision 1831/81, however, namely the volume of stocks. In practice, imposes no limitation on the disposal of delivery quotas lead to a freezing of stocks, which would have been stocks. indispensable if the decision had aimed to set up a system of delivery quotas.

In order to prevent supply within the common market from being inflated by The purpose of Articles 5 and 8 of that part of output which, under the Decision 1831/81 is, whenever exports quota system, may not be marketed decline, to prevent products not sold except in non-member countries, it outside the Community from being would have been sufficient for the offered for sale on the common market; Commission to fix quotas for output that would compromise the principal alone and to exclude proven exports. Far objective of the production-quota from doing so, the Commission system, namely to adjust Community established quotas for deliveries as a production to the slackening in domestic whole, thereby resorting to a method demand. Articles 5 and 8 prevent the which handicaps undertakings beyond ratio prevailing in any given reference what is necessary for the attainment of period between deliveries within the its objective. The Commission thus failed common market and total output from to observe the Community principle of being exceeded. proportionality. (b) The only point which the Court has (e) The margin of discretion available to decide is whether the rules provided to the Commission can operate only for under Articles 5 and 8 of Decision within the framework and limits of the 1831/81, which do not fix any "delivery system which it is authorized to create, quotas", fall within the powers conferred whereas Article 58 of the ECSC Treaty, on the Commission by Article 59 of the whilst authorizing it to introduce ECSC Treaty, to set up a system of production quotas, forbids it to production quotas. According to the introduce delivery quotas. Commission, the question calls for an affirmative answer.

supply originating in non-member Article 29 (1) (a) of the Convention on countries. A decline in demand on the the Transitional Provisions is of no markets of non-member countries might relevance, the Commission contends, to risk inflating the supply to the Common the interpretation of Article 58 of the Market of that part of the quota- ECSC Treaty: Articles 5 and 8 of controlled production which can no Decision 1831/81 in no way relate to the longer find outlets in non-member fixing of "delivery quotas" nor, a countries; that surplus of supply over fortiori, do they have any bearing on demand, which is due to external factors, "deliveries from one area to another may be eliminated either by a further within the Common Market". reduction in output or by the creation of machinery which exerts such pressure on undertakings that they themselves adjust production to the circumstances. The The case-law of the Court on which the Commission, being required by the applicant relies relates solely to the combined provisions of Articles 58 and 3 question — unconnected with this case (a) of the ECSC Treaty to ensure that — whether the Community holds regular supplies reach the common unwritten powers. market, whilst "taking into account the needs of third countries", chose, by way of Articles 5 and 8 of Decision 1831/81, to hold maximum domestic supply at a constant level. That solution has the Fixing of export quotas advantages, the Commission contends, of not obliging public authorities to intervene by cutting output still further The objection raised by the applicant to and of leaving to undertakings the the contested individual decisions is that initiative of adjusting their production if they introduce delivery quotas in respect demand from non-member countries of all the markets of non-member declines. countries as well. Such export quotas derive indirectly from production quotas inasmuch as, leaving stocks aside, the The rules provided for under Articles 5 applicant may deliver to non-member and 8 of Decision 1831/81 were the countries only that part of its output most consistent with market require- which it is unable to sell on the home ments and complied best with the market; it can export to such countries principle that the means employed must no more than a part of its current be proportionate to the objective production fixed by the Commission. pursued.

quantitative restriction of deliveries. The The Commission denies that Decision same conclusion may be reached by a 1831/81 fixes "delivery quotas" on comparison of Article 58 of the ECSC exports; products in stock may, Treaty with subparagraph (c) of the first irrespective of quarterly output, be paragraph of Article 61 thereof: whilst delivered without restriction to non- the Treaty has, it is true, taken into member countries just as within the account the problem of action with Common Market. regard to exports and has authorized minimum export prices — subject to (a) Article 58 authorizes the strict reserves — it has not allowed Commission to set up a system of maximum quantities to be fixed either production quotas. In that regard, it for exports or for production intended draws no distinction between output for export. That system is in keeping intended for exportation and output to with the basic principles of the ECSC be marketed within the common market. Treaty, leaving as it does foreign Supply as a whole requires to be commercial policy within the competence reduced, no matter whether it occurs on of the Member States. the common market or on the market of a non-member country; the ECSC Treaty does not merely envisage limiting (b) The Commission should have output intended for the home market but exempted from quota restrictions both takes account of a decline in demand deliveries to non-member countries and due to developments in the world consequently production intended for economy. The system of production such countries. quotas, being implemented in order to combat the crisis, must therefore equally take account of falling demand on the The Commission might have fixed world market. production quotas simply at the level of home demand and enabled undertakings to subtract, from their production (b) That conclusion is borne out by entering into the calculation of the Article 3 (a) of the Treaty, which production quota, those quantities requires the Community institutions to proved to have been exported to non- "ensure an orderly supply to the member countries, whilst at the same common market, taking into account the time adopting the relevant provisions to needs of third countries"; the reference prevent exported products from being re- to Article 61 changes nothing, since it is imported into the Community, thereby not a provision designed to deal with a nullifying the effect of the quota-fixing. crisis.

(d) The procedure under which Article Assent of the Council 58 (1) of the Treaty is designed to The applicant maintains that general provide legal authority for the decision Decision 1831/81 did not receive the setting up a quota system within the assent of the Council of Ministers as is Community and to prevent so imperative required by Article 58 (1) of the ECSC a measure, once issued, from en- Treaty. countering resistance from several national governments. The Commission's (a) In the course of its meeting of 30 legal title cannot derive from the rati- October 1980, the Council examined in a fication of the ECSC Treaty by the Par- very general way the problem of setting liaments of the Member States, whilst the up a system of production quotas, but no European Parliament's control over the clear draft decision for that purpose was Commission is insufficient to confer on it submitted to it by the Commission. the title provided by Article 58 (1). The applicant offers to furnish evidence (e) The distinction drawn by trie in that connection, inasmuch as it asks Commission between various com- the Court to order the Commission, ponents of the quota system, some of pursuant to Article 23 of the Protocol on which call for the Council's assent the Statute of the Court of Justice, to whereas certain others do not, is disclose all the evidence relating to the founded on indefinable criteria as to question, in particular the documents validity. submitted to the Council, the minutes and tape-recording of the meeting. The Commission contests the applicant's line of argument on both legal and (b) According to the applicant, the factual grounds. Commission has proceeded on the assumption that it is sufficient for the (a) The Council did indeed grant the Council to signify its broad agreement to assent required under the first paragraph the establishment of a quota system, of Article 58 (1) of the ECSC Treaty. whatever its nature may be. Article 58 (1) of the ECSC Treaty, The provision in question does not however, lays down a two-phase specify how "assent" should be under- procedure: during the first phase, the stood; on the other hand, the general Commission, acting on its own initiative, scheme and purpose of the provision records the existence of a "period of show that it is unnecessary for the manifest crisis", without being obliged to Commission to lay before the Council a obtain the consent of any other bodies; quota system which is formulated in in the second phase it is a matter of every detail and presented in the form of establishing a system of quotas. The a decision. Council's assent should relate to the establishment of a specific system, elab-1 (b) Article 58 creates a decision-making orated in detail and submitted in the process in three phases: in accordance form of a decision. with the first subparagraph of Article 58 (1) the Commission records, as an initial (c) The first paragraphs of Article 14 step, that the Community is confronted and Article 26 of the ECSC Treaty do with a period of manifest crisis and that not, contrary to the Commission's the means of action provided for in opinion, furnish any relevant evidence as Article 57 are not sufficient to deal with

it; by virtue of the same subparagraph, contested individual decisions are void in the Commission takes the second step, part. that of 'deciding to establish a system of production quotas; as the third step, The Commission considers two of the Article 58 (2) authorizes the Commission claims to be inadmissible and all of them to draw up the system in detail and to unfounded. make it legally binding by means of one or more instruments. The Council is brought into the decision-making process First claim in the alternative at the second stage; in order to set up a quota system, the Commission must In subparagraph 2 (a) of its conclusion, obtain the assent of the Council, but the applicant seeks a declaration that the does not have to do so as regards production quotas fixed by the disputed drawing up that system and embodying it individual decisions are void inasmuch as in legal instruments. The Council's assent they fall short of 286 000 tonnes in the relates to the principle of setting up a case of Category I a and 340 000 tonnes quota system, not to the details of the in the case of Category I b. instruments giving it specific form and giving it legally binding force. (a) On the question of admissibility, it must be appreciated that the applicant is (c) That point of view accords perfectly asking, not for the grant of a favour but with the roles assigned to the for the partial lifting of a burden Commission and to the Council by the imposed on it; it is not asking that an Treaty, in particular Articles 14 and 26 administrative measure favouring it be and both subparagraphs of Article 58 (1). • adopted, but that a measure oppressing it to be declared partially void. Such an (d) The purpose of the Council's assent approach, the applicant maintains, is in by no means implies that it must relate to keeping not only with the philosophy of the detailed rules of the quota system. economic law underlying the ECSC It aims merely to confer on the Treaty, resting as it does in principle Commission's decision a democratic on free enterprise and freedom of legitimacy which derives from a separate production, but also with the system of source; it is part and parcel of the remedies created by the Treaty itself. principal mission of the Council under the ECSC Treaty, namely to harmonize The Commission is wrong in contending the acts of the Commission with those of that the applicant is entitled, in this case, governments as the organs responsible to do no more than bring an action for the general economic policy of their under Article 35 of the ECSC Treaty for countries. failure to act, which would be inadmissible since the matter was not first submitted to the Commission. (e) The procedure whereby Decision 1831/81 was adopted did in fact comply with the requirements of Article 58 of (b) The levels claimed by the applicant the ECSC Treaty. for the two quotas at issue are justified by its entitlement to have the utilization rate of its Bremen No II mill brought into line with the average rate for B — Claims in the alternative Community plant.

(a) The request concerns, not a Second claim in the alternative "minus" but an "aliud"; it aims to have higher production quotas fixed for Cate- gories I a and I b than were granted to In subparagraph 2 (b) of its conclusions, the applicant. the applicant requests that the production quota fixed in respect of Category I a be A request such as that may not be put declared void in so far as it covers cold- forward except in connection with rolled plate over 3 millimetres thick. proceedings under Article 35 of the ECSC Treaty for failure to act. Hence (a) Subsequent to the commencement the applicant should, in the first place, of these proceedings, the Commission, have referred to the Commission its it is claimed, acknowledged in this claim for an increase in the production connection the unlawfulness of the quotas at issue; had no higher quotas individual decisions impugned: in been fixed within two months, the Commission Decision 2804/81/ECSC of applicant would have been entitled to 23 September 1981, amending for the bring legal proceedings against the second time Decision 1831/81 (Official implied refusal inferred from the Journal L 278, p. 1), in particular, it Commission's failure to act. inserted in the fifth indent of the second paragraph of Article 1 of Decision Since the procedural requirements were 1831/81, before the words "Cold-rolled not observed in this case, the request is plate of 3 millimetres and over (cut or inadmissible. coiled)", the words "Hot-rolled wide strip for processing into . . .". (b) The applicant fails to appreciate the scope of the individual decisions under challenge: the prohibition of producing (b) On this point, the action should not quantities in excess of the quotas derives, be dismissed but the Court should hold not from those individual decisions but that it is unnecessary for it to give a from Articles 4 (1) and 12 of general decision on the issue, and costs should Decision 1831/81. It is a matter of a be awarded accordingly. legislative restriction on undertakings' freedom of production; an action at law The Commission regards the request as seeking to impeach the individual unfounded on the ground that an decisions is irrelevant and therefore amending decision, 2804/81, has been inadmissible. brought into force.

(a) This claim does not have the same Fourth claim in the alternative purpose as the main claim: it seeks a declaration that that part of the disputed In subparagraph 2 (d) of its conclusions, individual decisions which decides to the applicant seeks a declaration that the take exported production into account individual decisions impugned are void in for the fixing of the quota is void. so far as they determine the portion of the production quotas which may be (b) The applicant's complaint is delivered within the Common Market. directed, not against a ban on expor- tation but against the decision to take The claim is justified by the line of account also of quantities delivered to argument put forward in the context of non-member countries for the purposes the main claim. of determining the production quota, which thus includes exports as well. The Commission reasserts that Articles 5 and 8 of Decision 1831/81 cannot be regarded as unlawful; hence the claim is (c) The claim is justified by the line of unfounded. argument advanced in support of the main claim, concerning the fixing of delivery quotas. V — Oral procedure Tae Commission takes the view that the claim either relates to the same subject as the main claim or else seeks the At the sitting on 15 December 1982 the annulment of a decision which it has parties presented oral argument and never taken. replied to questions put by the Court.

Decision

1 By application lodged at the Court Registry on 8 September 1981, Klöckner- Werke AG, a steel undertaking having its registered office in Duisburg, Federal Republic of Germany, instituted proceedings under the second paragraph of Article 33 of the ECSC Treaty, seeking a declaration of the nullity of certain Commission notifications in which, on 28 July and 31 August 1981, the Commission fixed, pursuant to general Decision 1831/ 81/ECSC of 24 June 1981 establishing for undertakings in the iron and steel industry a monitoring system and a new system of production quotas in respect of certain products (Official Journal L 180, p. 1), in relation to the applicant undertaking reference-production figures and reference quantities, together with production and delivery quotas for derived products in Category I for the third quarter of 1981.

2 In support of its action the applicant puts forward a series of submissions which may be summarized as follows:

1. Absence of proper assent by the Council to Decision 1831/81;

2. Failure by the Commission to observe its duty to guarantee, by the fixing of production quotas, a minimum utilization of productive capacity, and a lack in that regard of a statement of the reasons on which Decision 1831/81 was based;

3. Failure on the part of the Commission to take account, when fixing the production quotas, of the effects of illegal subsidies granted by certain Member States to their steel undertakings;

(d) declare the contested decisions void in so far as they prescribe a part of the production quotas which may be delivered on the Community market.

4 It became clear in the course of the proceedings that the claim in the alter- native in subparagraph (b) was due to an error in the drafting of the fifth indent of the second paragraph of Article 1 of Decision 1831/81, which was amended subsequent to the bringing of the action, by Article 1 (9) of Decision 2804/81 of 23 September 1981 (Official Journal L 278, p. 1). The applicant acknowledged that that head of claim had become redundant following the amendment.

5 In relation to the other alternative heads of claim, it may be observed that the claim in subparagraph (a) above is covered by the second submission and the claims in subparagraphs (c) and (d) by the fourth submission set out above. Those claims will therefore be considered jointly with the main conclusions to which they relate.

6 It should be noted, at the outset, that the applicant's line of argument in connection with this action largely coincides with the submissions made in support of the action in Case 119/81, between the same parties, which gave rise to the judgment of 7 July 1982 ([1982] ECR 2627). In the context of this case, however, it is appropriate to bear in mind that, in the meantime, Decision 2794/80 of 31 October 1980 (Official Journal L 291, p. 1) which formed the basis of the decisions contested in Case 119/81, has been replaced by the aforementioned Decision 1831/81, and furthermore that the applicant has formulated some fresh arguments in support of its action. It will therefore be appropriate to take account simultaneously of the points of law and fact already settled by the previous judgment and the new questions raised by these proceedings.

1 1 In laying down that form of consultation between the Commission and the Council, Article 58 did not determine its detailed arrangements. In those circumstances, it is a matter for the two institutions to provide, by common consent and in accordance with their respective powers, for the form which their cooperation shall take. The requirements of Article 58 are thus satisfied if such cooperation culminates in the Council's assenting to the "quota

JUDGMENT OF 11. 5. 1983 — CASE 244/81

system" which the Commission proposes to set up, without its being necessary to require the two institutions to examine a detailed draft decision.

i2 As the Court has already pointed out in its judgment of 7 July 1982, the decision of the Commission, the preamble to which recites the Council's assent, must be presumed to have been lawfully taken. The applicant has limited itself to putting hypothetical questions concerning possible irregu- larities which may occur in dealings between the Commission and the Council but it has failed to adduce the slightest evidence that the Council's assent was obtained otherwise than in circumstances consistent with the requirements of Article 58. There are therefore no grounds for ordering an inquiry in that respect.

n Lastly, as far as the requirements arising under Community law are concerned, it should be observed that the system of legal redress laid down by the ECSC Treaty affords appropriate guarantees in this respect. Both the Council and the Member States are entitled, by virtue of Article 33 of the ECSC Treaty, to refer a decision of the Commission for review by the Court if they consider that the Council's assent was not forthcoming in proper circumstances. It is sufficient record that in this case Decision 1831/81 was not the subject of such a challenge within the period prescribed by the Treaty.

17 In connection with that submission, the applicant has also pursued its challenge relative to the Commission's assessment of its productive capacity. It takes the view that the Court, in its judgment of 7 July 1982, did not give a definitive ruling on the point, and it therefore reasserts the inference which it draws from the so-called "Kawasaki Report" of 1 May 1981. In these proceedings it has further referred to an expert report drawn up on 12 January 1982 by Professor Jeschar with the assistance of the Stein-Heurty organization, concerning the capacity of a walking-beam furnace built by the latter and forming part of the Bremen rolling-mill. In the applicant's opinion, the conclusion drawn by that report justifies a more favourable appraisal of the productive capacity of the plant in question. The applicant has further submitted an accountancy report from Wollert-Elmendorf KG concerning the amount of the additional losses to be incurred by the undertaking should the output of its rolling-mill be restricted.

18 Finally, the applicant argues that the provisions of Decision 1831/81 which brought about a deterioration in its position as compared with that under Decision 2794/80 lacks any statement of the reasons on which it was based, and that Decision 1831/81 is, for that reason, void on the ground of infringement of an essential procedural requirement.

JUDGMENT OF 11. 5. 1983 — CASE 244/81

i9 It appears from an analysis of Decision 1831/81 that the Commission has thereby amended the basis for the determination of reference-production figures as previously fixed by Decision 2794/80.

2i The explanations supplied in the course of proceedings disclose that, by amending the system in that way, the Commission intended to define the basis of calculation used for determining reference production figures in a more equitable manner for all the undertakings in the Community, by dint of taking into consideration thereafter, both a production period prior to the crisis and a period close to the introduction of the system of production quotas. The Commission considers that as a result of a better adjustment of the criteria underlying the determination of quotas to the actual situation of undertakings, there was no further purpose in resorting to productive capacity as a corrective of the reference-production figures under the system laid down by the earlier decision. While retaining, for those undertakings which benefited from the corrective, part of the advantage thereby obtained, the Commission accentuated its effects by virtue of the arithmetical mean of the two factors taken into consideration by Article 6 (1) of Decision 1831/81.

22 In that context the Commission explains that, in the light of experience, it appeared that the effect of the corrective under Article 4 (3) of Decision 2794/80 was to confer an unjustified advantage on undertakings char- acterized by an operating rate below the Community average, to the detriment of the other undertakings. It notes that the applicant derived

KLÖCKNER-WERKE v COMMISSION

greater benefit from that provision than any other undertaking. The objective of the new decision was precisely to lessen that advantage in order to do justice to protests from other less-favoured undertakings. The Commission denies that the treatment of the applicant under the new decision may be described as causing its previous position to "deteriorate"; the new decision means merely partial withdrawal of an unjustified advantage.

JUDGMENT OF 11. 5. 1983 — CASE 244/81

26 It follows from the foregoing that the applicant, in demanding that the system of production quotas be organized in such a way that undertakings may find in it a guarantee of a proper utilization of their productive capacity, fails to appreciate the true purpose of Article 58 of the Treaty, which is not in fact designed to enable undertakings to exempt themselves in a period of crisis from the consequences of their earlier decisions regarding investment and output when such decisions have proved to be ill-suited to the trend of the economy.

27 Whilst it is true that measures adopted under Article 58 must enable the Community's steel industry as a whole to defend itself, on a collective basis and by a cooperative effort, against the consequences of crises occurring when demand declines, the article in no way places the Commission under a duty to guarantee to any given undertaking, to the detriment of others within the Community, such minimum production as that undertaking regards as appropriate in accordance with its own criteria of profitability and development, as the Court has already explained in its judgment of 7 July 1982.

28 As to the complaint made by the applicant concerning the determination by the Commission of the productive capacity of its business in the context of Article 4 (3) of Decision 2794/80, reference should be made to the reasoning of the judgment of 7 July 1982 which, following a detailed analysis of the history of that issue in the proceedings, unequivocally disallowed that complaint. It is sufficient to recall that the applicant had for years been supplying incorrect information on the productive capacity of its plants and that it was as a result of a review carried out on the undertaking's premises that the Commission agreed to accept a revised statement from the applicant, on which subsequent decisions on the determination of production quotas have thenceforth been based.

32 It should be observed in this connection, first, that the Commission did in fact show, in the paragraph of the preamble quoted, the reasons for what appears to be the essential component of the new decision, namely the adjustment of the reference periods to accord with a more suitable definition of the basis for calculating the quotas, by taking into consideration periods of production more representative than those previously adopted. That reasoning is such as to give the undertakings concerned sufficiently precise information regarding the objective pursued by the Commission. Thus the applicant's criticism really related only to the Commission's failure to state its reasons for the partial abandonment of a corrective factor — namely the reference to productive capacity — contained in Decision 2794/80.

JUDGMENT OF 11. 5. 1983 — CASE 244/81

33 According to the case-law of the Court (see, most recently, the judgment of 28 October 1982, Lion and Loiret Haentjens v FIRS, Joined Cases 292 and 298/81, [1982] ECR 3887), the statement of the reasons on which Community measures are based must be appropriate to the nature of the measure in question: it must show clearly and unequivocally the reasoning of the Community authority which issued the measure, so as to allow those concerned to take cognizance of the justification for the measure adopted and to enable the Court to exercise its power of review. In the case of a measure in the nature of a regulation, such as the general decision in dispute, the statement of reasons cannot be required to specify the often very numerous and complex matters of law or of fact constituting the subject- matter of such instruments as long as those matters fall within the frame- work of thé whole of which they form part.

system of production quotas, to take account of the effect of subsidies the illegality of which has been established in conformity with the appropriate procedures; but that, in the second place, the Court held that it was nevertheless impossible to expect the measures referred to in Article 58, which are designed to deal with a crisis, to be used to counteract the effect of illegal aids granted by Member States.

38 Since no fresh argument has been adduced in this respect, it may be concluded that this submission also must be dismissed.

4. S u b m i s s i o n a l l e g i n g t h e s u b s t i t u t i o n by the C o m m i s s i o n of " d e l i v e r y q u o t a s " in t h e c o m m o n m a r k e t for p r o d u c t i o n q u o t a s , a n d t h e s e t t i n g of e x p o r t q u o t a s

39 The applicant takes the view that the question of "delivery quotas", which was previously the subject of the action in Case 119/81, was not resolved by the judgment of 7 July 1982 inasmuch as the Court held therein that no such concept played any part in the determination of the production quotas for the second quarter of 1981. It therefore requests that that complex of questions be reconsidered and it argues, in substance, that Article 58 empowered the Commission to take action with regard only to the production of steel and not to its marketing, whether on the common market or on export markets. The ECSC Treaty as a whole does not support the inference of "implied powers" enabling the Commission to take action with regard to the delivery of goods.

40 As to the distribution of deliveries between the domestic market and non- member countries, the applicant takes the view that Article 58 does not empower the Commission to regulate external trade or, in particular, to curtail exports. Its view is that, under the scheme of the ECSC Treaty, commercial policy falls within the competence of Member States. The applicant explains that the Commission was empowered to fix production quotas only at the level of domestic demand, and to permit undertakings to deduct from the output to be taken into account, for the calculation of production quotas, those quantities proven to have been exported to non- member countries.

45 The judgment of 7 July 1982 also emphasized that it lies within the discretion of the Commission to take trade with non-member countries into account in the context of the measures to be adopted in pursuance of Article 58. In that respect it is, in fact, for the Commission to take account both of the needs of the common market itself and of the interests of the Community in its relations with non-member countries. Whilst it is true that Article 58 empowers the Commission, in periods of manifest crisis, to take action with regard to production without regard to trade with non-member countries,

KLÖCKNER-WERKE v COMMISSION

the provision cannot be interpreted as meaning that it permits no more than the allocation to every undertaking of a comprehensive production quota which may be disposed of either on the domestic market or on the market of non-member countries.

46 It follows that the Commission did not exceed the powers which it derives from Article 58 when, in the contested decision, it fixed separate quarterly reference-production figures and reference quantities for the application of the abatement rates governing the determination of the production quota and of that part of production which might be delivered on the common market.

47 That submission must therefore also be dismissed.

Costs

OPINION ÓF MR REISCHL — CASE 244/81

2. Orders the applicant to pay the costs.

O'Keeffe Pescatore

Bosco Koopmans Bahlmann

Delivered in open court in L u x e m b o u r g on 11 M a y 1983.

P. H e i m A. O'Keeffe Registrar President of the Fourth Chamber

I — Translated from the German.