C-250/83

JUDGMENT OF 15. 1. 1985 — CASE 250/83

JUDGMENT OF THE COURT (Fifth Chamber) 15 January 1985 *

In Case 250/83

Finsider (Società finanziaria siderurgica per azioni), Rome, represented by Sergio M. Carbone of the Genoa Bar and Roberto Barabino, with an address for service in Luxembourg at the Chambers of Nico Schaeffer, 12 Avenue de la Porte-Neuve, applicant, v

Commission of the European Communities, represented by Oreste Montako, a member of its Legal Department, acting as Agent, with an address for service in Luxembourg at the office of Manfred Beschel, also a member of its Legal Department, Jean Monnet Building, Kirchberg, defendant,

APPLICATION for the annulment of a general decision of the Commission, Decision No 2748/83 of 30 September 1983 amending for the second time Decision No 2177/83/ECSC on the extension of the system of monitoring and production quotas for certain products of undertakings in the steel industry (Official Journal L 269 of 1 October 1983, p. 55),

JUDGMENT

Facts and Issues

JUDGMENT OF 15. 1. 1985 — CASE 250/83

In the first place, the first paragraph of Commission shall carry out the necessary Article 14 of Decision No 2177/83 provides adjustments by general decision.' inter alia that:

By Decision No 2748/83 of 30 September 'If, by virtue of the scale of the abatement 1983 amending for the second time rate for a certain category of products set Decision No 2177/83/ECSC on the for a quarter, the quota system creates extension of the system of monitoring and exceptional difficulties for an undertaking production quotas for certain products of which, during the twelve months preceding undertakings in the steel industry (Official the quarter in question: Journal L 269, p. 55) the Commission replaced the first indent of the first — did not receive aids pursuant to paragraph of Article 14 of Decision No Commission Decision No 2320 / 81 / 2177/83 by the following: ECSC, with the exception of aids for closures as provided for in Article 4 of that decision, '— did not receive aids authorized by the Commission with a view to covering operating losses'.

FINSIDER / COMMISSION

Whereas undertakings which have received 3. Conclusions of the parties aids authorized by the Commission with a view to covering operating losses must be The applicant claims that the Court should: excluded from the benefit of Article 14 since it would be unjustifiable to grant supp­ (a) Declare void the part of the contested lementary quotas to an undertaking in order decision referred to in the application; to retrieve a situation of exceptional difficulties whilst, on the other hand, it has (b) Adopt any further measure, in the light received aids granted with a view to of inter alia Article 34 of the ECSC covering operating losses for the same Treaty, which it considers necessary; reason; and (c) Order the Commission to pay the costs.

Whereas, in the light of the numerous The Commission contends that the Court requests received from various undertakings should: since Decision No 2177/83/ECSC was adopted, it would appear inequitable not to Dismiss the action; allow those which have received aids to benefit from adjustments under Articles 14 Order the applicant to pay the costs. and 14a, with the exception, however, of those undertakings which have received aids authorized by the Commission with a view 4. Submissions and arguments of the to covering operating losses; parties

Admissibility Whereas, such being the case, the application of Decision No 2177/83/ECSC With regard to the admissibility of the has therefore encountered an unforeseen action the Commission relies on the wisdom difficulty within the meaning of Article of the Court. 18 (1) thereof...'.

In the second place, the purpose and effect 4.1. Alleged unlawfulness of Decision No of Decision No 2748/83 are quite different 2748/83 for misuse of powers by discrim- from the aims which the Commission's inating against the applicant power to lay down rules for additional quotas by means of decisions is intended to serve. The criteria for granting additional quotas must necessarily serve the aim of 4.1.1. The applicant states that according allowing the undertakings which have been to the original version of Article 14 of caused exceptional difficulties by the quota Decision No 2177/83 additional quotas system to receive additional quotas, in pref­ were to be granted or refused on the basis erence to other undertakings. The criterion of a criterion which did not cause adopted by Decision No 2748/83 is likely unreasonable discrimination between the to exclude from entitlement to additional undertakings: additional quotas were to be quotas undertakings which have the worst refused to undertakings which had already operating results, that is, undertakings received aid within the States to which they which have suffered such exceptional belonged, whereas it might be granted to difficulties that their losses have forced the their 'unassisted' competitors whose unfav­ State to intervene. ourable position justified more favourable treatment. Moreover, the contested decision is intrin­ After the adoption of Decision No 2748/83 sically defective because it is unlawful to the position was radically changed: the discriminate unjustifiably and unreasonably, possibility of additional quotas was as the decision does, against undertakings extended to all producers but discrimination which more than any others are in a was introduced (solely) with regard to position requiring support and aid. undertakings which received aid to cover operating losses, thus restricting their productive capacity and their ability to 4.1.2. The Commission states that it has a compete with other undertakings. wide discretion in determining the conditions for entitlement to additional The applicant considers that such discrim­ quotas. It refers to the judgments of the ination between undertakings in the same Court of 11 May 1983 in Joined Cases 303 sector in the common market shows that the and 312/81 (Klöckner-Werke v Commission contested decision constitutes a misuse of [1983] ECR 1507) and 22 June 1983 in powers which is apparent even in the Case 317/82 (Usines Gustave Boël v grounds for the decision cited by the Commission [1983] ECR 2041). Commission in the fourth recital in the preamble to the decision. Just as it does when it introduces or extends In the first place, the reference to 'aids the general quota system, it took into intended to cover operating losses' as a account, for the purposes of applying the criterion of discrimination between under­ equity clause in Article 14, all the current takings which 'merit' additional quotas and economic, social and market circumstances. undertakings which do not 'merit' them is Based on that, the wording of Article 14 certainly arbitrary, when the effect of the seeks to reconcile that assessment of the aid on the activity of the undertaking does circumstances with the general aims

In conclusion, by introducing a new condition which was likewise objective and general and thus did not discriminate against the applicant, the Commission was Consequently, Decision No 2748/83 is merely exercising the discretion which it unlawful for infringement of Article 18 of enjoyed. Decision No 2177/83.

4.2. Unlawfidness of Decision No 2748/83

(b) The Commission states that in the days following publication of Decision No 4.2.1. Alleged infringement of Article 18 of 2177/83 it received numerous requests for Decision No 2177/83 adjustment of quotas from small and medium-sized undertakings which alleged that they were experiencing exceptional (a) The applicant submits tht the contested economic difficulties as a result of the quota decision is based in particular on Article 18 system and the worsening of the crisis in the

JUDGMENT OF 15. 1. 1985 — CASE 250/83

The Commission concludes that the adoption of Decision No 2748/83 was fully In the present case the Commission set out within its powers under Article 18 of succinctly the unforeseen difficulties which Decision No 2177/83. application of the contested decision encountered. It also explained that it was 4.2.2. Alleged breach of essential proceduralnecessary to classify aid granted to under­ requirements (Article 33 of the Treaty) and takings differently from the way in which failure to state reasons (Article 15 of the the previous decision had classified it and Treaty) the Commission's classification of the various kinds of aid certainly falls within the (a) The applicant states that according to limits of its discretion. Article 15 of the Treaty all measures of the Commission must state the reasons on which they are based. Moreover, since 4.2.3. Alleged infringement of Decision No Article 18 of Decision No 2177/83 is of an 2320/81 exceptional nature it requires a very precise statement of reasons. The Commission ought to have stated clearly what were the (a) The applicant considers that although unforeseen difficulties in the application of Decision No 2748/83 is apparently intended Decision No 2177/83. to govern production quotas it in fact seeks to establish an unacceptable hierarchy In the present case the Commission between the various kinds of aid. No such confined itself to stating categorically that, hierarchy is provided for in Decision No since the wording of Article 14 of Decision 2320/81, which treats all the aid referred to No 2177/83 there, once authorized by the Commission and consequently considered compatible '(i) renders ineligible a number of under­ with the ECSC Treaty, as having the same takings which are experiencing value. Moreover, the Court in its judgment exceptional difficulties' and of 7 July 1982 in Case 119/81 (Klöckner- Werke v Commission [1982] ECR 2627) (ii) various undertakings had requested the excluded any necessary link between aid application of Article 14, and the fixing of quotas.

4.2.4. Alleged breach of the principle of equal treatment laid down in Article 4 (b) of (b) The Commission states that the seri­ the Treaty ousness of the crisis affecting the steel market forced it to accept that aid was essential to overcome the enormous (a) The applicant maintains that the difficulties confronting all undertakings in Commission is guilty of a serious breach of the Community. However, to prevent aid, the principle of equal treatment, which is which was unfortunately indispensable, from the foundation of the iron and steel being granted without co-ordination and Community, by knowingly permitting involving greater distortion to competition undertakings in the Federal Republic of than was strictly unavoidable, the Germany alone to avail themselves of Commission adopted Decisions Nos 257/80 Decision No 2748/83, thereby causing and 2320/81 establishing Community rules serious damage to the applicant, which is for aids to the steel industry. In the latter obviously discriminated against in relation decision the Commission stated clearly, to those undertakings. especially in Section 2 of the preamble, that it did not put all aid in the same category. It is easy to infer from the wording of the decision that apart from emergency aid, the (b) The Commission considers that the kind of aid which is regarded as most likely applicant's submission is as serious as it is to damage competition is aid to facilitate gratuitous. The Commission repeats what it continued operation, the frequency and previously said in relation to the alleged amount of which must be limited to what is discrimination between undertakings strictly necessary. referred to by the applicant. It maintains further that the new Article 14 introduced by Decision No 2748/83 allows the grant of aid for modernization to a good many small and medium-sized undertakings, especially The Commission states further that in Italian, to the exclusion of the larger under­ Decision No 2177/83 it had already taken takings in all the Member States. account of the aid being gratned to the steel industry. In the contested decision it merely refined its approach in view of the experience acquired and the exceptional 5. Oral Procedure difficulties encountered.

3 The applicant puts forward a number of submissions in support of its action. In substance it maintains that Decision No 2748/83 is unlawful by reason of:

Misuse of powers with regard to the applicant in that the decision discriminates between undertakings in the same market sector of the steel industry, which is also contrary to Article 4 (b) of the ECSC Treaty.

Infringement of Article 18 of Decision No 2177/83, on which the Commission based the contested decision.

Misuse of powers with regard to the applicant in that the true aim of the contested decision is to amend Decision No 2320/81 on aid to the steel industry.

Breach of essential procedural requirements, especially the obligation to state reasons provided for in Article 15 of the ECSC Treaty.

FINSIDER / COMMISSION

5 The applicant states that Article 14 of Decision No 2177/83 in its original version established an objective criterion for entitlement to additional quotas, namely its restriction to undertakings which had not already received national aid other than aid for closure and that criterion did not cause unreasonable discrimination between the undertakings. By making it possible for undertakings which had received other forms of national aid with the exception of that intended to cover operating losses to obtain additional quotas, Decision No 2748/83 introduced discrimination against undertakings which received the latter kind of aid and thus restricted their ability and productive capacity in relation to all other competing undertakings. Such discrimination is said to be based on an arbitrary, formal and nominal criterion which excludes in advance any analysis of the true reasons for the grant of the aid in question.

6 Moreover, Decision No 2748/83 tends to exclude the possibility of additional quotas for undertakings which have the worst operating results and whose needs are thus the most urgent. The effect of the decision would thus be entirely the opposite of the objective sought in giving the Commission power to draw up a scheme of additional quotas for undertakings for which the system of quotas had created exceptional difficulties. In those circumstances the applicant concludes that the discrimination is not only contrary to Article 4 (b) of the Treaty but also represents a misuse of powers in its case.

7 The Commission contends that when the steel market crisis became worse, and in particular when unforeseen difficulties in the application of Decision No 2177/83 arose, it became necessary pursuant to Article 18 of Decision No 2177/83 to amend Article 14 thereof to make it possible to grant additional quotas to under­ takings which had received aid other than that intended for closure while still

9 It appears from the preambles to both Commission Decision No 2320/81 of 7 August 1981 establishing Community rules for aids to the steel industry (Official Journal L 228, p. 14) and the aforesaid Decision No 2177/83 extending the quota system that the rules pursue a common aim, namely to promote the restructuring needed to adapt production and capacity to foreseeable demand and to re-establish the competivity of the European steel industry. It is consistent with that aim that undertakings which have received a form of aid likely to delay the desired re­ structuring, namely aid intended to cover operating losses, should be excluded from the benefit of the additional quotas, the grant of which may likewise reduce their willingness to restructure. Moreover, the Commission cannot be reproached for imposing a precise and objective criterion leaving no room for consideration of the special circumstances which have led in each case to the operating losses covered by the national aid in question.

10 On the contrary, to have enabled undertakings which during the previous twelve months have received other kinds of national aid authorized by the Commission to

FINSIDER / COMMISSION

obtain additional quotas does not constitute a misuse of power with regard to the applicant. Those other kinds of aid (investment aid, aid for closure or research and development) are in fact likely to encourage restructuring and improvement of competitivity. The distinction made by the contested decision between such aid and aid intended to cover operating losses is thus based on an objective and sub­ stantial criterion with regard to the aims which the Commission may lawfully pursue as part of its industrial policy.

JUDGMENT OF 15. 1. 1985 — CASE 250/83

concluded that the application of the said provision had in fact encountered unforeseen difficulties and that it was perfectly entitled to remedy the situation by adopting Decision No 2748/83 pursuant to Article 18 of Decision No 2177/83.

14 For the purpose of resolving this problem it must first of all be emphasized that the purpose of the amendment to Article 14 of Decision No 2177/83 is within the limits of the adjustments authorized by Article 18 thereof. The submission made by the applicants concerns only the actual circumstance which justifies the authoriz­ ation, namely that the difficulties encountered were in fact unforeseen. Even if the Commission ought to have foreseen the difficulties in question when adopting Decision No 2177/83, its failure to do so cannot amount to a misuse of powers. It follows that the submission must be dismissed.

Alleged infringement of Decision No 2320/81

15 The applicant maintains that although the aim of Decision No 2748/83 is apparently to regulate production quotas, in fact it seeks to establish a hierarchy between the various kinds of aid which was certainly not contemplated by Decision No 2320/81. The real aim of Decision No 2748/83 is thus to amend the rules on aid and that amounts to a misuse of powers vis-à-vis the applicant.

THE COURT (Fifth Chamber)

hereby:

1. Dismisses the application.

2. Orders the applicant to pay the costs.

Due Kakouris

Everling Galmot Joliét