C-265/82

JUDGMENT OF THE COURT (FIFTH CHAMBER) 19 OCTOBER 1983 1

Union Sidérurgique du Nord et de l'Est de la France (Usinor) v Commission of the European Communities

( ECSC — Exceeding quota — Fine)

Case 265/82

1. Objection of illegality — Measures against which an objection of illegality may be raised — Individual decisions — Excluded (ECSC Treaty, Art. 36, third para.)

2. ECSC — Production — System of steel production quotas — General Decision No 1831/81 —Adjustment of quotas — Purpose and detailed rules (General Decision No 1831/81/ECSC, Art. 10)

v

COMMISSION OF THE EUROPEAN COMMUNITIES, represented by its Legal Adviser, Etienne Lasnet, acting as Agent, with an address for service in Luxembourg at the office of Oreste Montako, Jean Monnet Building, Kirchberg, defendant,

APPLICATION for a declaration that the decision of the Commission of 13 August 1982 concerning a fine imposed pursuant to Article 58 of the ECSC Treaty is void,

THE COURT (Fifth Chamber),

composed of: Y. Galmot, President of Chamber, Lord Mackenzie Stuart, O. Due, U. Everling and C. Kakouris, Judges,

Advocate General : Sir Gordon Slynn Registrar: H . A. Rühl, Principal Administrator

products in Category la intended for the tonnes its production quota for the third production of small tubes. According to quarter of 1981 in respect of the products the recitals in the preamble to the in the above-mentioned category. After decision: giving the applicant an opportunity to submit its written observations and "... In view of the poor market hearing its representatives, the Com­ situation, it has proved necessaiy to mission imposed on the applicant by include hot-rolled wide strip and strip decision of 13 August 1982 a fine of FF steel for the manufacture of small welded 4 215 404 for exceeding the quota. tubes in the quota system.

By application lodged at the Court Since the latter category also covers Registry on 27 September 1982 the certain kinds of tube employed mainly in applicant challenged that decision in an the energy sector which are in active action in which the Court has unlimited demand and which, for statistical jurisdiction under the second paragraph purposes, are difficult to distinguish from of Article 36 of the ECSC Treaty. The any other small welded tube, the quotas procedure followed the normal course. for undertakings will have to be adjusted Upon hearing the report of the Judge- at their request and on presentation of Rapporteur and the views of the supporting documents, in order to allow Advocate General, the Court decided to production of such tubes to proceed." open the oral procedure without any preparatory enquiry and to assign the Article 10 of Decision No 1831/81 provides that: case to the Fifth Chamber.

The applicant explains that it produces Article 10 provides that the Commission hot-rolled products which it sells to shall "at the undertaking's request undertakings for processing into tubes. accompanied by proof of use (of the Hot-rolled products for that purpose are product) ... adjust the quota ...". The manufactured to order and production is decision does not state what is meant by started only upon receipt of the order. In "use" and also does not state whether this case, the production quota excess the Commission is permitted to adjust with which it is charged relates to a firm the production quota, the delivery quota order placed by Corinth Pipeworks SA or both. Nowhere does the text state that on 13 July 1981, which was accepted on the production quota must be adjusted 20 August 1981. Production for that by reference to the deliveries effected order took place in September 1981. The over the same quarter. In the absence of order was shipped on 14 and 26 October any provision in the text, the applicant 1981, dates determined by the ship's understood that the additions to the timetable. quota would be determined on the basis of the orders appearing in the order book, without the relevant deliveries necessarily having to be effected within the quarter concerned. Contrary to the applicant's expectation, the Commission calculated the adjust­ ment of the quota under Article 10 of Decision No 1831/81 on the basis of the increase in deliveries in the course of The Commission's interpretation is one quarter, applying to the production arbitrary and unforeseeable. The Com­ quota the same increase in tonnes as that mission justifies its interpretation on the established in those deliveries. Thus the basis that the products in question were Commission acted upon an erroneous exclusively intended for producers of interpretation of the article in question, tubes within the Community and ascribing to it a different meaning from the production tonnages necessarily that given to it by producers and in coincided with the delivery tonnages. particular by the members of Eurofer. That is correct after a certain period of time, but is not necessarily correct within one quarter.

The Commission's interpretation and In the alternative, the Commission application of Article 10 of Decision contends that the applicant's claim that No 1831/81 are therefore unlawful and its application and interpretation of the individual decision of 13 August Article 10 were erroneous is unfounded. 1982 must be declared void. The Commission points out that it is necessary to be strict as regards proof of the use of a product in Category la for the manufacture of small tubes. Calcu­ The Commission's decision is also lation of the adjustment of the pro­ contrary to the principle of proportion­ duction quotas must be based on actual ality. The use of the production of the deliveries and not on orders. The third quarter of 1981 was guaranteed by delivery document is the means of proof firm orders accepted during that quarter. closest to use and the least uncertain. By The excess of production over deliveries contrast, the order is an unreliable and in that quarter was compensated for by uncertain test. An order precedes an equivalent reduction in production production, may cover two or more during the fourth quarter. The fact that quarters and may even be wholly or production in the fourth quarter partially amended during that time. remained below the quota granted in the same amount as the alleged excess proves that the excess for which a fine was imposed constituted a purely formal infringement. The Commission's decision Again, during rolling, the intended use must be declared void on the ground of (for tubes) may be altered to a different infringement of the principle of propor­ type of use. Undertakings of the size of tionality or, in the alternative, should be Usinor are sufficiently flexible to be able revised in view of the purely formal to adjust themselves to the provision nature of the infringement and the fine contained in Article 10 and can, by reduced to a token amount. reason of the large quantities which they produce, ensure that production equals deliveries.

managed to adapt their production to the The Commission applied the general rule level of actual deliveries. whereby a quota excess must be penalized by means of a fine of 75 ECU for each tonne in excess of the quota. That general rule constitutes the very The Commission considers that Usinor principle on which the system is based. applied and continued to apply its own The use of the word "generally" is interpretation of Article 10 at its own meant to allow rather for individual risk. The consequence of that attitude cases such as a declaration of bankruptcy was that the quota was exceeded and a by the undertaking which exceeded its penalty must be imposed in respect of quota. Usinor's interpretation of Article such excess. A delay on the part of the 10 in that regard cannot constitute Commission in communicating its grounds for relaxing the penalty. position on Article 10 could not in any event justify the imprudent attitude of the applicant. Furthermore, the Com­ mission disputes that there was any such delay. There were exchanges on several The applicant in its reply challenges the occasions on that matter between the objection of inadmissibility raised by the Commission and the representatives of Commission. The facts of the case are Eurofer, of which Usinor forms part, quite different from those on which the and the letter of 10 November 1981 judgment of 31 March 1965 in Case merely confirmed and formalized those 21/64 (Macchiorlati Dalmas e Figli v contacts. High Authority, [1965] ECR 175) were based. In any event, the Court has unlimited jurisdiction in this application, which is directed primarily against the The Commission disputes that the individual decision of 13 August 1982. It manner in which it applied Article 10 is only incidentally that the applicant resulted in discrimination between pro­ challenges the legality of certain pro­ ducers. The argument relating to stocks visions of general Decision No 1831/81 seems to arise out of a misunderstanding. as they are interpreted by the Com­ mission. In that regard, its application is admissible under the third paragraph of Article 36 of the Treaty, because the The Commission vigorously rejects the decision of 13 August 1982 is based on applicant's argument that it imposed in that general decision of which it is an respect of a purely formal infringement a application (see the citation and the fine equal to that which would be second recital in the preamble to, and payable in the case of a real quota Article 1 of, the decision of 13 August excess. In an objective system such as the 1982). There is a necessary connection system of quotas, there can be no between the two decisions. On the other question of regarding infringements as hand, the applicant does not challenge purely "formal". A quota is either the decision of 23 December 1981. exceeded or not exceeded. The basic principle of quotas is the very fact that they are based on quarters. The applicant's statement that "the time-lag which gave rise to the decision imposing On the merits, the applicant disputes the a fine.did not result in any benefit to the Commission's argument that production applicant and did not cause any damage quotas for primary products can be to the Community" is irrelevant. regulated only by reference to deliveries.

The applicant contests the Commission's statement that an undertaking of its size is sufficiently flexible to be able to adjust itself to the provision contained in Article 10. It provides a detailed expla­ In its rejoinder, the Commission returns nation of that point. to its objection of inadmissibility. It disputes the applicant's argument and insists upon the need to observe the strict time-limit for instituting proceedings to have a decision declared void. The applicant also rejects the Com­ mission's argument that it applied its own interpretation of Article 10 at its own risk. The Commission's argument that the applicant ought to have applied the original quota until its quota had On the merits, the Commission points been adjusted deprives Article 10 of out that Article 10 relaxes the rules on Decision No 1831/81 of any meaning, quotas and is not to be applied auto­ since it would mean that, in the absence matically. One of the essential conditions of a clear statement on the part of the is the provision of proof that the Commission, undertakings must abstain products were used for the production of from producing Category la products in small tubes. The criterion of actual excess of the original quota in spite of delivery at least ensures that checks are demand on the market. The applicant effective. By making deliveries out of disputes in particular that the under­ its stocks, Usinor benefited from the

JUDGMENT OF 19. 10. 1983 — CASE 265/82

possibility of effecting deliveries in the application of the fines applicable for last quarter of 1981 which were larger exceeding quotas. than its production tonnages and therefore it cannot claim discrimination. The Commission denies that it was guilty IV — Oral procedure of any delay in its decision to adjust the quotas. It points out that none of the At the sitting on 22 June 1983 oral other 21 undertaking which benefited argument was presented by L. Funck- from the application of Article 10 Brentano, for Usinor, and E. Lasnet, for questioned the use of the criterion of the Commission. deliveries actually made for the adjust­ ment of their quotas. Finally, it refers to The Advocate General delivered his the importance of a strict and automatic opinion at the sitting on 14 July 1983.

3 The applicant requested the benefit of that provision in order to meet an order from Corinth Pipeworks SA, received on 13 July 1981 and accepted on 20 August 1981. The rolled products ordered were produced in September 1981, that is to say during the third quarter of 1981. They were shipped on 14 and 26 October 1981, during the fourth quarter of 1981, on dates determined by the ship's timetable.

4 The Commission did not deny that that production was used for purposes which entitled the applicant to an adjustment of its quota, but it nevertheless considered that the adjustment should be made by increasing the production quota for the quarter in which delivery, and not production, took place.

5 Consequently, the applicant's quota for the third quarter was increased by decision of 23 December 1981 to 671 852 tonnes for products of Category la, taking into account solely the deliveries effected during that quarter. The applicant did not institute proceedings before the Court challenging that decision within the prescribed period. Since the applicant's production amounted to 685 950 tonnes — an excess of 8 556 tonnes taking into account a tolerance of 3 % — the Commission adopted the contested decision imposing upon the applicant a fine calculated in accordance with Article 12 of Decision No 1831/81/ECSC by multiplying the number of tonnes of excess by 75 ECU.

6 The applicant claims that the Commission's decision of 13 August 1982 should be declared void in so far as it declares in Article 1 that the applicant exceeded its production quota by 8 556 tonnes for products in Category la in the third quarter of 1981 and therefore imposes in Article 2 a fine of 641 700 ECU (FF 4 215 404).

USINOR v COMMISSION

11 It is thus clear that the adjustment to the quota of an undertaking which has been able to demonstrate that its production was used in accordance with the requirements of Article 10 as cited above must be granted for the quarter in which the rolled products were produced, regardless of the quarter in which the rolled products were produced, regardless of the quarter in which they were delivered. The Commission's interpretation, which seeks to adjust quotas for the quarter of delivery, in fact produces results which are incompatible with the aims of Article 10, as is shown in particular by the circumstances of this case. Thus production which is effected at the end of a quarter and which cannot be delivered before the beginning of the following quarter cannot be regarded — in the event of adjustment — as exceeding the quota purely because the undertaking has exhausted its original quota.

12 Equally mistaken is the argument put forward by the Commission at the hearing to the effect that an undertaking in the applicant's situation should not declare the excess production in one quarter until the following quarter. Such a solution amounts in practice to inciting the undertaking to submit to the Commission, in breach of the relevant provisions, inaccurate declar­ ations, which suffices to show that the interpretation suggested by the Commission is manifestly impracticable.

13 In the circumstances, the Court is of the opinion that the infringement of which the applicant is accused on the ground that it exceeded the quota fixed for the third quarter is purely formal and that the Court should, in the exercise of the unlimited jurisdiction conferred upon it by the second paragraph of Article 36 of the ECSC Treaty, annul the fine imposed by the Commission.

hereby declares:

1. Article 2 of the Commission's decision of 13 August 1982 imposing a fine of 641 700 ECU on the applicant is void;

2. The remainder of the application is dismissed;

3. The Commission is ordered to pay the costs.

Galmot Mackenzie Stuart

Due Everling Kakouris