C-10/83

JUDGMENT OF THE COURT (SECOND CHAMBER) 1 MARCH 1984

Metalgoi SpA v Commission of the European Communities

(Steel production quotas — Fines)

Case 10/83

• ECSC — Production — Steel production quotas — Determination of the basis on which quotas are fixed — Application of the system to quantities intended for export to non- member countries — Fine for exceeding quotas — Economic difficulties endangering the very existence of the undertaking if the fine is levied— No effect (ECSC Treaty, Art. 58; Decision No 2794/80, Arts 2 and 9)

In Case 10/83

JUDGMENT OF 1. 3. 1984 — CASE 10/83

THE COURT ( Second Chamber )

composed of: K. Bahlmann , President of Chamber , P. Pescatore and O . Due , Judges ,

Advocate General : P . VerLoren van Themaat Registrar : H . A. Rühi , Principal Administrator

gives the following

JUDGMENT

After reaching the view in the third quarter of 1980 that the European steel According to Article 3 (1) of Decision industry was in a manifest crisis for the No 2794/80, the quarterly production purposes of Article 58 of the ECSC quotas are to be fixed for each under­ Treaty and that the indirect courses taking on the basis of individual ref­ of action available to it had proved erence production figures and by the ineffective or insufficient to cope with application of abatement rates to those the crisis, the Commission decided that reference production figures. in order to restore a balance between supply and demand it had to intervene directly by means of binding measures relating to production. Consequently, by Article 3 (2) provides that the Com­ Decision No 2794/80/ECSC of 31 Oc­ mission is to inform each undertaking of tober 1980 (Official Journal 1980, L 291, its reference production figures and of p. 1), it established a system of steel the production quotas resulting from the production quotas for undertakings in application of the abatement rates.

METALGOI / COMMISSION

By a letter dated 6 April 1981 the Commission notified Metalgoi SpA, a Following a hearing held on 28 May steel undertaking established in Brescia, 1982 the amount by which the of its reference production figures and Commission alleged that the quota had production quota for Group IV products been exceeded was reduced from 1 428 for the second quarter of 1981. The to 1 358 tonnes after it was found that production quota was later adjusted there was a difference between the slightly and Metalgoi was informed of applicant's actual production and its the adjustment by a letter from the declared production. Commission dated 9 June 1981.

After Metalgoi had submitted further By a letter dated 1 February 1982, the observations on 13 July 1982, the Commission, acting pursuant to Article Commission, by Decision No C (82) 36 of the ECSC Treaty, accused 1631/6 of 24 November 1982 (Official Metalgoi of having exceeded by 1 428 Journal 1982, C 324, p. 2, point 2), tonnes the production quota allocated to found that Metalgoi had exceeded by it for products in Group IV for the 1 358 tonnes the production quota for second quarter of 1981. Group IV products allocated to it for the

JUDGMENT OF 1. 3. 1984 — CASE 10/83

After making all necessary declarations and suspending the contested decision, In its written submissions the Com­ declare the Commission's decision of mission claimed that the Court should 24 November 1982 void; dismiss the application and order the applicant to pay the costs. In the alternative, reduce the fine imposed by that decision; Upon hearing the report of the Judge- Rapporteur and the views of the In the further alternative, grant a long Advocate General, the Court decided to period for payment of the fine, with all open the oral procedure without any necessary declarations; and preparatory inquiry. However, the parties were each requested to reply in writing to a question. The applicant was Order the defendant to pay the costs. requested to confine its oral observations at the hearing to arguments concerning the legality of the decision of 24 By an application lodged on 15 March November 1982 imposing the fine, since 1983 Metalgoi applied, under the second the decisions of 6 April and 9 June 1981 paragraph of Article 39 of the ECSC fixing the quota are not the subject of Treaty and Article 83 (1) of the Rules of these proceedings. Procedure, for an order suspending the operation of the decision contested in the main action. By an order of 5 October 1983 the Court assigned the case to the Second The President of the Court made the Chamber, pursuant to Article 95 (1) and following order pursuant to the first (2) of the Rules of Procedure.

METALGOI / COMMISSION

III — Submissions and argu­ The level of production of those sections ments of the parties is such that it cancels out the applicant's excessive deliveries on the ECSC market.

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export and cannot therefore have (c) The argumentswhich the applicant affected the common market. bases on its difficult financial situation cannot be accepted. They are not The Commission considers that none of supported by any evidence and in any case the very purpose of intervention by the applicant's submissions are well the Commission in order to regulate the founded. market is to prevent an even more difficult situation for undertakings. (a) During the second quarter of 1981 Decision No 2794/80 was in force. Article 2 of that decision provided for (d) The sale of goods in non-member four groups of rolled products; Group countries is a commercial decision IV comprised light sections, which adopted without constraint by the under­ included merchant bars. The products in taking concerned. Exporting under­ question-belong to that category. Under takings cannot be exempt from the quota the system introduced by Decision No system on that ground. 1831/81, which entered into force on 1 July 1981 and was therefore not applicable to the quotas for the second (e) As far as the amount of the fine is quarter of 1981, merchant bars are concerned, the applicant does not offer classified-in Category VI. any specific arguments. Since the submissions advanced in support of the The products in question are un­ application for a declaration that the questionably merchant bars. Although contested decision is void are unfounded, intended by the applicant undertaking to there is nothing to justify a reduction of be put to particular uses after further the fine. processing, the basic product remains a merchant bar in respect of which production quotas were allocated to (f) The Commission has always granted the applicant. The fact that several undertakings which prove that they are processing stages eventually lead to the in a difficult economic situation an manufacture of a product not covered by extension of time for payment. The the ECSC makes no difference in the applicant has never requested an present case, since that final product extension. is obtained from a product whose production is controlled by the ECSC.

2 On the basis of declarations made by the applicant, the Commission, by decision of 6 April 1981, fixed the applicant's reference production and production quota for Group IV products, which include merchant bars. The quota was slightly increased by an amending decision of 9 June 1981. Those decisions were not contested by the applicant.

3 Having found that the production quota thus fixed had been exceeded, the Comission gave the applicant an opportunity to submit ovservations before fining it 101 850 ECU or LIT 136 533 999 in the decision at issue in these proceedings.

4 By an order dated 20 April 1983 the President of the Court suspended the operation of the contested decision subject to certain conditions.

5 The applicant advances various submissions in support of its application. It contends, first, that the Commission did not make use in its case of the hardship clause in Article 14 of Decision No 2794/80, thereby refusing to take account of the difficulties which it had to contend with as an under­ taking of modest dimensions which contentrates on the manufacture of a

JUDGMENT OF 1. 3. 1984 — CASE 10/83

single product and which is required to operate at a rate approaching its maximum capaciy in order to remain profitable; secondly, the excess production was mainly used for the manufacture of plastic-covered fencing posts, which do not fall within any of the categories defined in Decision No 2794/80; thirdly, all the excess production was exported out of the Community. In the alternative, it contends that enforcement of the penalty would lead to its closure and liquidation and requests a reduction of the fine.

Decision No 2794/80, fails to take account of the scheme of that decision, under which production quotas are fixed not on the basis of finished products made from steel but on the basis of the intermediate products described in detail in Article 2 and Annex 1.

n It is not disputed that the applicant declared production of merchant bars falling within Category IV and that its quota was fixed for that product on the basis of that declaration. The fact that an undertaking carries out further processing on a product subject to quotas before disposing of it to third parties does not exempt the product from the production restrictions provided for by Decision No 2794/80. The submission must therefore be dismissed.

i2 As regards the submission that the applicant exported its production outside the Community, it need only be pointed out, as the Court has already had occasion to do, that the production restrictions provided for by Decision No 2794/80 are not confined to steel disposed of within the common market but also apply to quantities destined for export, partly because of the need to ensure that the international agreements entered into by the Community are complied with and partly because of the danger that exported steel might find its way back on to the common market (for the Court's most recent judgment, see that of 11 May 1983 in Case 24 / 81 , Klöckner, [1983] ECR 1451, para. 4). This submission must therefore also be dismissed.

n In the alternative, the applicant submits that the levying of the fine could endanger its very existence, since it has neither the reserves nor the size to cope with the fine imposed. It requests its reduction on that ground. In answer to that submission it may be pointed out, as the Court has repeatedly held, most recently in its judgment ©f 14 December 1983 in Case 263/82 (Klöckner, [1983] ECR 4143), that an undertaking may not rely upon the economic difficulties which it must contend with in order to exempt itself from the restrictions imposed on account of the crisis and exceed at will the production quota allocated to it. Such conduct would create increased difficulties for all the other undertakings and would eventually bring about

THE COURT (Second Chamber)

hereby:

1. Dismisses the application;

2. Orders the applicant to pay the costs, including the costs of the application for interim measures.

Bahlmann Pescatore Due

Delivered in open court in Luxembourg on 1 March 1984.