C-344/85

Mr President, The legislature expected that the system Members of the Court, thus established would enable undertakings 'to draw up their production programmes a n d . . . give the Commission an oppor- tunity, when imposing new quotas in respect of the ensuing quarter, to allow for vari- 1. Ferriere San Carlo SpA asks the Court to ations in supply and demand . . . ' (fourth declare void the decision of 9 October 1985 recital in the preamble). in which the Commission of the European Communities imposed on it a fine of ECU 117 500 on the ground that it had exceeded the quota for reinforcing bars (Category V) That decision's successor, Decision No which it could deliver on the common 1696/82/ECSC of 30 June 1982 (Official market during the last quarter of 1983. Journal 1982, L 191, p. 1), did more than extend the life of the abovementioned system for one year. Experience had 'shown that effective monitoring of the system of production quotas demands exact The legislative framework of the dispute is knowledge of the stock situation at the well known. In June 1981, in order to deal beginning of the period of application of with the continuing serious crisis in the [the] decision' (third recital in the European steel industry, the Commission preamble). In other words, the Commission established a new system intended to control had become aware that undertakings could production, based on a scheme of quarterly 'hide' possible excesses of production in a quotas (Decision No 1831/81/ECSC of 24 given quarter by claiming that the quantities June 1981, Official Journal 1981, L 180, manufactured in excess of the quota formed p. 1). Essentially, for the period from 1 July part of a stock which already existed before 1981 to 30 June 1982 undertakings were the reform. They were therefore required to required : declare, solely in respect of products subject to the quota system, their stock position as at 30 June 1982 (second subparagraph of Article 2 (1)). (a) to observe, in respect of certain categories of products, production and delivery quotas fixed at the beginning of each quarter by the Community auth- Finally, by Decision No 2177/83/ECSC of orities; 28 July 1983 (Official Journal 1983, L 208, p. 1), which is also the decision applicable in this case, the system was maintained in force until 31 January 1984. Products in Categories II and III were also made subject (b) to report their production and deliveries to the quota system and the undertakings each month. concerned were therefore required to report * Translated from the Italian.

their stock position as at 30 June 1983 in 3. The application cannot be upheld. With regard to those products. regard to the first argument, I must point out that if undertakings were really entitled to sell, without any limitations as to deliveries, stocks accumulated under the production quota system (and thus, to stock part of the production allocated to them each quarter in order to sell it later outside 2. Let me now consider the substance of the the quota system on the common market, application. Reduced to its essentials, the which is the most advantageous) the applicant's argument is very simple. It claims Community authorities would no longer be that the new rules do not expressly prohibit able to control the development of supply the sale outside the quota system of and demand. However, in Section 1 I have products in stock, on condition, however, shown that that control is one of the most that they were lawfully accumulated, that is important objectives of the reform to say, in compliance with the production introduced in 1981. quotas. That is precisely the case in regard to the consignment of bars for which the fine was imposed; it comes from a stock of 7 327 tonnes which was held in stock on 30 June 1983 and declared by San Carlo to the supervisory authorities. Furthermore, that stock was perfectly lawful because during the period from 1 July 1982 to 30 June 1983 It is certainly true that no provision the undertaking scrupulously observed the expressly prohibits that sort of practice. production quotas allocated to it. However, the reason for that silence is evident. As the Court is aware, under the new system the Commission fixes quotas on a quarterly basis, and for that purpose each undertaking is required to report its production and deliveries every month. Since compliance with the quota system excludes of itself the creation of stocks, it is That is not all. The excess deliveries in the logically impossible to speak of 'legitimate' fourth quarter of 1983 are also justified by stock. In other words, after 1 July 1981 the tolerance which the Community undertakings could no longer lawfully institutions have displayed for some time. It constitute or increase stocks of products is clear that undertakings disposed of stocks subject to quota with the intention of selling left over from the previous system through them freely within the Community. It was sales carried out outside the limits laid down therefore unnecessary to prohibit such trade. by the quarterly delivery quotas both after the adoption of Decision N o 1831/81/ ECSC and the following year, that is to say during the period of application of Decision No 1696/82/ECSC. The Commission imposed no sanctions on any of those undertakings. In such circumstances, San Carlo considers that it cannot be denied that Furthermore — and here I turn my the excess deliveries complained of were attention to San Carlo's second made in good faith. Consequently, the fine argument — the reform gives rise to a imposed on 9 October 1985 is unjustified. problem of transitional arrangements, which

Brussels recognized and tried to resolve infringement is without foundation. What it after the decision had been adopted. On 1 sold outside the quota system had in fact July 1981, undertakings could have stocks been accumulated in bad faith. of steel or reinforcing bars manufactured within the limits of the quotas laid down under the previous rules. In order to avoid making them subject to the restrictions introduced by the new system, and thus 'penalizing' the producer twice, it was decided not to bring proceedings during the At the hearing, the applicant replied that the succeeding 12 months in respect of 2 343 tonnes at issue were in stock before 1 deliveries made outside the quota system. As July 1982 and, consequently, could be can be seen from the statement ¡ of the lawfully disposed of in addition to its reasons on which the contested measure is delivery quotas. I do not reject the possi- based (page 3), a similar decision not to bility that the facts alleged are correct but I impose sanctions in respect of infringements do not see how that could change the was later taken for the period from 1 July conclusion which I propose to the Court. 1982 to 30 June 1983. However, the Commission took that approach because it appeared that a considerable number of undertakings had mistakenly interpreted the obligation to report their stock position on a specific date as implying that they were free to dispose of those stocks on the common The contested sale took place towards the market. end of 1983, that is to say at a time when the obligation to comply with the quarterly delivery quotas for reinforcing bars must be regarded as absolute or, in any event, as no longer subject to the exceptions permitted until July of that year. With regard to products in Category V, Decision N o 2177/83/ECSC, in force at the time of the There is no doubt, at least in the second delivery, imposed no new obligation to case, that the supervisory authorities acted report stocks but merely extended the in a very 'tolerant' manner. However, that is duration of the quota system. Consequently, not sufficient to justify the conduct of San after 1 July 1983 existing stocks, even those Carlo on the basis that it acted in 'good constituted before July 1982, could no faith'. I should point out that during the longer be sold on the common market two years following the reform the practice without infringing the quarterly limitations was to permit the disposal of old stocks, fixed for the category. that is to say those accumulated before 1 July 1982, but not to permit undertakings to increase them or to constitute new stocks. However, it can be seen from the file that during the period from 1 July 1982 to 30 June 1983, the applicant not only did not definitively dispose of its stocks but Finally, if the applicant actually considered continued to increase them, the total going itself entitled, during the final quarter of from 2 741 tonnes to 7 327 tonnes. That 1983, to dispose of 2 343 tonnes of rein- being so, its allegation that it acted without forcing bars accumulated before 1 July being aware that it was committing an 1983, it should have contested the