JUDGMENT OF 26. 6. 1958 — CASE 12/57 SIDÉRURGIE DU CENTRE-MIDI v HIGH AUTHORITY ECSC
In Case 12/57
THE COURT composed of: M. Pilotti, President, A. van Kleffens and L. Delvaux, Presidents of Chambers, P. J. S. Serrarens, O. Riese, J. Rueff, Ch. L. Hammes, Judges, Advocate-General: M. Lagrange Registrar: A. Van Houtte
gives the following
JUDGMENT
Issues of fact
I. Facts
In Decision No 2/57 which extends the application of Decisions No 26/55 and No 3/56, the same arrangement provides for the equalization of the prices of imported ferrous scrap and domestic scrap and the effecting of economies in scrap. It requires, in addition to contributions at the basic rate, contributions at a supplementary rate imposed in terms of the proportion of scrap consumed in existing plant in excess of the amount of scrap consumed during a reference period in the past. In order to take account of all individual situations each undertaking is permitted to choose its reference period (six months from seven consecutive months between 1 January 1953 and 31 January 1957).
Article 8 of the decision imposes upon undertakings a gradually increasing contribution whilst Article 9 permits undertakings which have reduced the specific input of their plant or their production processes, to reduce or even completely to eliminate their contributions at the supplementary rate.
The applicant states that the undertakings represented by the Syndicat de la Sidérurgie du Centre-Midi have been seriously affected by Decision No 2/57, in that:
1) No undertaking manufactures basic Bessemer pig-iron because there are no phosphorous ores;
2) The blast furnaces use a larger proportion of scrap in ordero o reduce the manganese content of local ore in the production of pig-iron castings;
3) Almost all the steel works are isolated from the blast furnaces and cannot operate on a liquid charge since the means of producing steel are of necessity limited to Martin furnaces or to electric furnaces, and in the Centre-Midi regions electric furnaces cannot carry out duplex processes. Electric furnaces in these regions thus have higher specific input references for ferrous scrap than the average for the Community and in the present state of technology they cannot lower them. The defendant replies that there is a structural failing in the market in ferrous scrap which presents a problem regarding both prices and quantity. It describes the various stages in the development of the measures which it has been required to take in order to avoid a serious shortage involving extreme measures of allocation. It sought a more flexible means of intervention, equalizing prices of imported ferrous scrap with prices of Community scrap and making possible an increase in the production of steel in accordance with the general objectives. It encouraged undertakings to effect economies in ferrous scrap. In accordance with the unanimous assent of the Council of Ministers it adopted Decision No 2/57 of 26 January 1957. This arrangement may be contrary to certain individual interests but the High Authority considered that a balance had to be established with those individual interests, as is required by a wider view of the general interest of the Community.
II — Conclusions of the parties
The applicant claims that the Court should:
‘annul Articles 6 (3), 8 and 9 of Decision No 2/57 of 26 January 1957, and, consequently, Articles 3 (1), 4 (3), 5, 6 (1) and (2) and 7 thereof and order the High Authority to bear the costs.’
The defendant contends that the Court should:
‘dismiss the application submitted against Decision No 2/57 in that it is not vitiated by misuse of powers affecting the applicant, with all the legal consequences thereof, in particular with regard to settlement of the fees, costs and any other expenses.’
III — Submissions and arguments of the parties
A. The admissibility of the application
1. Whether a misuse of powers has indeed been directed against the applicant association itself
The defendant maintains that misuse of powers was not directed against the applicant association as Decision No 2/57 is a general decision adopted in the common interest of all the undertakings of the Community.
The applicant complains that the effect of the application of the general provisions of Decision No 2/57 varies according to the greater or lesser ease with which undertakings can effect economies in ferrous scrap.
This is why the applicant association, which asserts that it contains undertakings unable to effect such economies, is the victim of the provisions which it maintains are illegal. The defendant states that the applicant's principal complaint is that it must pay more for scrap than other undertakings in the Common Market. Nevertheless, the undertakings producing special steel in the Centre-Midi are no worse off for effecting economies in ferrous scrap than undertakings of the same kind situated in other parts of the Common Market. If differences exist in this respect, they are rather between producers of ordinary steel and producers of special steel. Nevertheless, the applicant can hardly claim that those two categories of producers are competitors. The defendant concludes that it is difficult to estimate the extent to which the undertakings forming the applicant association have been adversely affected by the contested provision.
2. Whether the submissions really constitute complaints of misuse of powers
The High Authority draws up a classification of the seven complaints in the application.
1) First principal complaint: the High Authority has selected as its sole objective the attainment of economies in ferrous scrap to the exclusion of other objectives which must also determine its action (Treaty, Article 3).
2) Second principal complaint: the High Authority has pursued as its principal and clearly-defined objective the allocation of ferrous scrap (Treaty, Article 59).
3) Third principal complaint: the High Authority has also pursued as its principal and clearly-defined objective the influencing of investments (Treaty, Article 54).
4) First alternative complaint: the High Authority has imposed upon certain undertakings a special charge which is prohibited under Article 4 (Treaty, Article 4 (c)).
5) Second alternative complaint: the High Authority has established an unfair system for the undertakings since refunds are not available on the same terms to every undertaking and in respect of all kinds of plant (Treaty, Article 4 (b)).
6) Third alternative complaint: the High Authority has, contrary to Article 65, adopted provisions more restrictive than their purpose requires and has brought about a discrimination in that it accords like treatment to situations which are not comparable (Treaty, Article 65).
7) Fourth alternative complaint: the contested decision gives rise to grave social problems (Treaty, Article 3 (e)).
The complaints set out under points (4) and (6) above are based on a clearly mistaken interpretation of Article 4 (c) of the Treaty, on the one hand, and of Article 53 (b), on the other. Neither misuse of powers nor infringement of the law obtains.
The defendant remarks that the applicant in its reply does not dispute that it is necessary to distinguish between the objective and the effect of a decision but it considers that in the present case the applicant has in fact called the objective in question. The defendant concludes that this constitutes a change in the line of argument submitted in relation to the application, which expressly called in question the effects of the contested provisions.
The High Authority takes note of those observations and draws the necessary distinction between the objective and the content of the contested provisions to group the complaints of the applicant association under two heads, the second of which will only be examined as an alternative. Thus it distinguishes:
a) Three complaints of misuse of power or of procedure in relation:
to Article 3,
to Article 59,
to Article 54.
b) Four complaints of infringement of the Treaty in relation:
to Article 59,
to Article 54,
to Article 4 (b),
to Article 3 (e) of the Treaty.
The applicant replies that every undertaking has an interest which should be protected to enjoy total freedom in its operations, either to plan investments after 31 January 1958 or to make full use of existing investments. It is therefore clear that the undertakings forming the Syndicat de la Sidérurgie du Centre-Midi have a specific interest in contesting the provisions relating to the supplementary rate and to the reference consumption.
The applicant continues that the High Authority maintains that the complaints raised against it constitute mere effects or results of the contested decision. By altering the definition it considers that it is freed from conducting an argument and merely provides as an alternative the reply to the arguments submitted by the applicant.
Although it is true that misuse of powers is a defect affecting the objective and not the result of a decision, it is none the less true that consideration of the results foreseen makes it possible to discern the real intention of the High Authority and the objectives which it pursues. It was impossible for the High Authority not to take into account the situation in which its decision would involve an entire category of undertakings in the Community. It deliberately disregarded this. This shows its real intentions which go beyond the objectives stated in its decision.
B. Substance
First complaint: Misuse of powers with regard to the objectives of Article 3 of the Treaty.
The applicant maintains that, whilst it is true that the objective of the equalization scheme set out again in Decision No 2/57 is to ensure a regular supply of ferrous scrap, the new provisions in the decision have quite another objective: to fix the supply of ferrous scrap at the level of the reference period and to influence investments.
It is the phrase appearing in the introduction to Article 3, ‘The institutions of the Community shall… in the common interest’, and not subparagraph (a), which governs these provisions as a whole. The contested provisions pursue objectives at variance with the protection of the common interest, in particular Article 6 (3) of the decision, providing that for plant put into operation after 31 January 1958 the reference consumption for scrap shall be nil, and Article 9 of the decision granting a rebate on the contribution at the supplementary rate in terms of a reduction in the specific input reference of ferrous scrap. Article 9 adversely affects all undertakings equipped with Martin furnaces and solid-charged electric furnaces, which are used in all the plant of the Centre-Midi. Article 6 (3) adversely affects all the undertakings in the Community since they are all capable of drawing up investment programmes to be put into operation after 31 January 1958. The power which the High Authority holds in the common interest has thus been diverted from its essential objective.
The defendant replies that in the circumstances then prevailing regular supplies of scrap could only continue to be ensured if economies in scrap were effected. That is why the two aspects of Decision No 2/57, the equalization of scrap imported from third countries, on the one hand, and economies in ferrous scrap, on the other, reflect the same wish to ensure a regular supply to the Common Market. This is the basic objective and it must in the circumstances of the present case take a certain precedence over the other objectives which can only be pursued if it is attained. Furthermore, there has been no disregard for the protection of the common interest. The distinction drawn between old and new plant does not involve systematic discrimination between undertakings.
Second complaint: The High Authority has pursued as its principal and clearly-specified objective the allocation of ferrous scrap.
The applicant states that the real and clearly-specified objective of the contested decisions is twofold: on the one hand, the allocation of ferrous scrap and, on the other, the influencing of investments. As the High Authority wishes to restrict imports, it has established through the contested decision a means of allocation which merely consolidates established rights by the adoption of a double-price system which in fact sets up a special charge. When the High Authority is confronted with, a problem of quantity it tries to resolve it by presenting scrap consumers with the following alternatives: either to pay the tax at the increased rate (a fiscal measure) or to reduce consumption (a measure of allocation). In the one case there is a tax objective and in the other the allocation is the objective. Neither of those two objectives can be pursued under Article 53; the decision is accordingly vitiated by misuse of powers.
Moreover, the wider and more flexible application of Article 53 confers upon the High Authority a liberty of action which it lacks under Article 59. Since allocation can only validly be effected pursuant to the system laid down by Article 59 the High Authority has committed a misuse of procedure.
Finally the applicant maintains that the contested decision prevents freedom of competition, which cannot be the objective of a financial arrangement.
The defendant replies that the alternative between the fiscal measure and allocation which the applicant advances indicates a confusion between the concepts of the objective and of the result. It is true that the result of the contested provisions is not determined: some undertakings may prefer to pay the supplementary contribution rather than renounce an increase in their consumption of ferrous scrap; Decision No 2/57 does not guarantee that in no case will there be an increase in the consumption of ferrous scrap. This is precisely because it constitutes an indirect means of action affecting quantities through prices: the increase in the cost of ferrous scrap which necessarily results from payment of the supplementary contribution encourages undertakings not to increase their consumption of ferrous scrap whilst it does not entirely prevent this. The applicant's line of argument implies the prohibition in principle of all indirect action exercised on quantities through prices, which completely contradicts the provisions of the Treaty, in particular those of Articles 5 and 57.
With regard to misuse of procedure the applicant's line of argument indicates that it has misunderstood the scope of the powers conferred upon the High Authority under Article 53 and, more particularly, that it has misunderstood the concept of indirect means of action.
Finally, with regard to the complaint of infringement of the law, the defendant states that the contested provisions merely constitute an adjustment of the equalization charge intended to correct the effect entailed by the equalization scheme of encouraging an increase in the consumption of ferrous scrap and that, consequently, they merely constitute an arrangement for the compensation and regularization of prices in accordance with the provisions of Article 53.
Third complaint: As its second principal objective the High Authority sought to influence investments.
The applicant states that with the objective of influencing investments the High Authority established a system of rebates on the equalization contribution which involves unfair aspects since such rebates are not equally available to all undertakings and in respect of all kinds of plant. The contested provisions, and in particular the provisions of Article 6 (3) of the decision show a well-defined intention automatically to impede as much as possible new investments, a short-term objective, pursuit of which is claimed to render possible the attainment of the final objective, economies in ferrous scrap.
There is in addition misuse of powers in that the defendant, in order to prevent investments which might cause increased consumption of ferrous scrap, employed Article 53, although it should have observed the requirements of Article 54, which oblige it to appraise the geographical, technical and economic condition^ of the undertakings and thus to refrain from indiscriminately penalizing all new investments. The defendant replies that the allegation that the High Authority pursued the objective of preventing new installations amounts to confusing the concepts of the objective and of the result. The applicant in fact complains that the High Authority has disregarded the objectives laid down in Articles 3 (d) and (g). The applicant argues as though the provisions of those subparagraphs required that all new installations should always be encouraged without regard to the circumstances and the supplies available. The defendant considers that the implementation of subparagraphs (d) and (g) must be combined with the implementation of the other subparagraphs in the same article; it follows from this that favourable treatment cannot be accorded to increases in the productive capacities of steel which involve an increase in the requirements of ferrous scrap in excess of the available resources.
With regard to the scope of the powers conferred upon the High Authority under Article 53 in relation to Article 54 the defendant replies that there is no valid reason to concede that Article 54 is exhaustive with regard to investments, and that the High Authority is thereby prevented from adopting on other grounds, for example Article 53, decisions capable of affecting investments.
Fourth complaint: The High Authority imposed upon certain undertakings a special charge prohibited by Article 4 (c) of the Treaty.
The defendant observes that the applicant is clearly mistaken in relying upon the provisions of Article 4 (c), which prohibit subsidies or aids granted by States, or special charges imposed by States, in any form whatsoever; in fact the wording shows that this relates only to measures adopted by States.
Fifth complaint: The High Authority has established an unfair system for the undertakings and is guilty of discrimination in that it has accorded equal treatment to situations which are not comparable (Article 4 (b) of the Treaty).
According to the applicant, Article 9 of the contested decision establishes a discrimination between the undertakings in that rebates are not equally available to each undertaking and in respect of all kinds of plant. This system results in establishing an unfair system amongst the undertakings; the contested measures treat as equivalent situations which are not comparable, in particular with regard to plant and manufactur ing processes put into operation after 31 January 1958.
The defendant considers that it is impossible to agree with this view, which amounts to maintaining that discrimination arises merely because general provisions do not involve exactly the same effects for all the persons concerned. In fact the contested provisions are based upon a criterion objectively adapted to furthering the proper objective of the measures of the High Authority. The normal result of the supplementary taxation of increased total consumption of ferrous scrap in relation to a reference period is:
that a reference consumption is not available for plant and manufacturing processes put into operation after 31 January 1958
that undertakings can obtain rebates on their contributions to the extent to which they assist in reducing the lack of ferrous scrap in the Community.
Reduction of the specific input reference of electric furnaces is not technically impossible. Decision No 2/57 does not involve an arbitrary distinction to the disadvantage of a specific category of producers and, moreover, is not capable of distorting competition between categories of producers, whose products, special steel, on the one hand, and ordinary steel, on the other, are not in competition with each other.
Sixth complaint: The High Authority has, contrary to Article 65, adopted provisions which are more restrictive than is necessary for their purpose.
The defendant considers that a confusion exists in connexion with the wording of Article 53 of the Treaty. According to Article 53 (a) the financial arrangements set up through the agreement of a number of undertakings must be ‘necessary for the performance of the tasks set out in Article 3 and compatible with the Treaty, and in particular with Article 65’. Article 53 (b) confers upon the High Authority power itself to make ‘any financial arrangements serving the same purposes’. If the words are to be given their precise meaning, it is absolutely clear that the requirement of compatibility with the provisions of Article 65, which appears in Article 53 (a), is not one of the purposes which financial arrangements must serve. Clearly this requirement only makes sense because it relates in subparagraph (a) to measures agreed upon between undertakings, whilst in subparagraph (b) the High Authority itself acts.
It is thus impossible to consider that the arguments of the applicant constitute a complaint of misuse of powers, or even a complaint of infringement of the Treaty, with regard to Decision No 2/57.
Seventh complaint: The contested decision produces acute and wide-spread social problems which must inevitably continue if this decision is implemented (Article 3 (e) of the Treaty).
The defendant replies that when it adopted the provisions necessary to ensure a regular supply of scrap to the Common Market as a whole at a reasonable price it avoided a situation arising which, by endangering the development and, indeed, the maintenance of the operations of the iron and steel industry in the Community, would not have enabled the standard of living and working conditions of the workers to improve.
IV — Procedure
The application is in the appropriate form and was submitted within the prescribed period.
The instruments appointing the agents and lawyers of the parties are in order.
The written procedure followed the normal course. The statements of the parties, with their related annexes, were lodged within the prescribed periods and were duly served.
Law
A — Admissibility
According to the applicant's statutes it constitutes a private association governed by French law having as its objective the furtherance and defence of the general interests of iron and steel producers; it is common ground that the contested provisions of General Decision No 2/57 are capable of affecting certain interests, even though perhaps divergent, entrusted to the applicant. The applicant accordingly has capacity to institute proceedings before the Court of Justice in accordance with the provisions of Articles 33, 48 and 80 of the Treaty.
The applicant formally alleges that its members have been affected by misuse of powers on one or more occasions; it produces a relevant statement of the reasons leading it to believe that there has been a misuse of powers on one or more occasions. The purpose of the arguments upon which it relies is in fact to obtain a declaration that, when the High Authority adopted the contested provisions, it exercised the powers conferred upon it under Article 53 (b) of the Treaty for purposes other than those for which they were conferred upon it, both through serious disregard for certain of the objectives referred to in Article 3, and through the clear intention of attaining objectives specifically governed by Articles 54 and 59 whilst avoiding the special procedures prescribed in the said articles.
Consequently the application is admissible.
B — Substance
The High Authority has selected Article 53 as the legal basis of the scheme for the equalization of ferrous scrap which it has established. That article permits it to intervene in connexion with the tasks assigned to it under the Treaty, in particular under Article 3 thereof.
Article 53 appears in Chapter II, entitled ‘Financial Provisions’. The other articles of this chapter relate to the use of funds which the High Authority obtains through levies on production or by loans. It may accordingly be considered that the financial arrangements referred to in Article 53 are arrangements based on the transfer of resources, in particular arrangements in the nature of equalization or compensation. This interpretation is confirmed by the last paragraph of Article 62 which provides that certain equalization payments ‘may … be instituted as provided in Article 53’.
The equalization arrangements do not directly affect prices but rather the factors contributing to the formation of prices. In this way those factors, without preventing prices from being freely fixed, modify the level at which they are fixed. The financial arrangements provided for in Article 53 affect by such alterations in the level of prices the other characteristic features of the state of the market and in particular the supply of and demand for the relevant products. These arrangements thus constitute powerful and effective intervention procedures at the disposal of the High Authority, but are nevertheless ‘indirect’ within the meaning of Article 57 of the Treaty as distinct from the direct means of action through establishment of production quotas (Article 58) or the allocation of resources (Article 59).
The High Authority, by using the financial arrangements provided for in Article 53, is in a position to exercise a broad influence on the market in coal and steel whilst it must be borne in mind that Article 53 restricts the application of such arrangements to the procedures ‘necessary for the performance of the tasks set out in Article 3 and compatible with this Treaty, and in particular with Article 65’. The express reference made to Article 3 does not release the High Authority from its duty to observe the other articles of the Treaty and in particular Articles 2, 4 and 5 which, together with Article 3, must always be observed because they establish the fundamental objectives of the Community. Those provisions are binding and must be read together if they are to be properly applied. These provisions can stand by themselves and accordingly, in so far as they have not been adopted in any other provision of the Treaty, they are directly applicable. If they have been adopted or are governed by other provisions of the Treaty words relating to the same provision must be considered as a whole and applied together. In practice it will always be necessary to reconcile to a certain degree the various objectives of Article 3 since it is clearly impossible to attain them all fully and simultaneously as those objectives constitute general principles which must be observed and harmonized as far as possible; on the other hand such financial arrangements must be instituted without infringing the provisions of Article 58 and of Chapter 5 of Title III of the Treaty.
Decisions prior to Decision No 2/57 were concerned to equalize the prices of imported ferrous scrap and domestic scrap. Decision No 2/57 continues this system but adjusts it and supplements it with new provisions intended to affect at the same time the price of ferrous scrap and the total volume of purchases in order to encourage undertakings to effect economies in ferrous scrap in the interests of a regular supply to the market.
If the demand had over an extended period exceeded the supply of scrap it could have led to a ‘serious shortage’ for which the procedures laid down in Article 59 are appropriate. If the High Authority wished to avoid following those procedures — and the provisions of Article 57 require it to endeavour as far as possible to refrain from doing so — it could not avoid the need and the duty to apply the procedure prescribed in Article 53 (b), subject to observance of the conditions for its application.
1. The complaint of misuse of powers with regard to Articles 3 and 53 of the Treaty, that is to say, that the contested provisions pursue objectives which are contrary to the objectives in Articles 3 and 53
a) Pursuant to Article 53 (b) of the Treaty the High Authority may, with the unanimous assent of the Council, itself make any financial arrangements which it recognizes to be necessary for the performance of the tasks set out in Article 3. The exercise of the powers thus conferred upon the High Authority is subject to the conditions set out in Articles 2 to 5 concerning the establishment, administration and guidance of the Common Market. Pursuant to Article 2 of the Treaty the community has as its task to contribute to economic expansion, growth of employment and a rising standard of living in the Member States. The means prescribed for the attainment of those objectives consists in the establishment of a Common Market on the conditions laid down in Article 4 concerning the abolition of obstacles to trade. Pursuant to Article 2 the Community is obliged progressively to bring about conditions which will of themselves ensure the most rational distribution of production at the highest possible level of productivity while safeguarding continuity of employment and taking care not to provoke fundamental and persistent disturbances in the economies of Member States. To those ends the Community must ensure on the market the establishment, maintenance and observance of normal conditions of competition and, subject to observance of the priorities laid down by Article 57 of the Treaty in relation to its means of action, it must, in accordance with the provisions of Article 5, ‘exert direct influence upon production or upon the market only when circumstances so require’. In pursuing the objectives laid down in Article 3 of the Treaty the High Authority must permanently reconcile any conflicts between those objectives considered individually and, when such reconciliation proves unattainable, must grant such temporary priority to one or other of them as appears necessary having regard to the economic facts or circumstances in the light of which, in carrying out the tasks entrusted to it under Article 8 of the Treaty, it adopts its decisions. Pursuant to the provisions of Article 57 of the Treaty in the sphere of production, the High Authority is required to give preference to the indirect means of action at its disposal, in particular to intervention in regard to prices. As has previously been stated, such means of action must be regarded as including the financial ar rangements provided for in Article 53 since they influence prices in particular through compensation for and correction of factors which contribute to their formation. Since those arrangements contribute to the formation of prices they alter the price-level on the market and thereby influence the effects which the price-level produces on the direction of production, and thus on the structure of the means of production. Such arrangements thus provide the High Authority with the means to modify the effects of ‘normal competitive conditions’ whilst ensuring, in accordance with the requirements of Article 5 of the Treaty, the maintenance and observance of these conditions. By making appropriate use of this powerful means of intervention the High Authority is largely capable, provided that the circumstances require it, of bringing about the required reconciliation between the objectives listed in Article 3 of the Treaty in carrying out the task with which it is entrusted under the Treaty. The powers which have thus been conferred on the High Authority are however limited by the specific provisions set out in Title III of the Treaty. In particular these powers would be used for an objective other than their legal purpose if it appeared that the High Authority had applied them with the exclusive, or at any rate the decisive, purpose of evading a procedure especially prescribed by the Treaty in order to deal with the circumstances with which it is required to cope. At the time when the contested decisions were adopted the market in ferrous scrap was widely recognized as being characterized by a severe shortage of Community supplies, by mounting difficulties in imports and by large-scale and rapid increases in the price of foreign scrap. This situation arising from those economic facts and circumstances cannot in any event be regarded as prima facie excluding intervention by the High Authority to counter the consequences at variance with the requirements of Article 3 of the Treaty which this situation might have involved. Furthermore the High Authority's appraisal of the situation in the light of which the contested provisions were adopted does not by itself show that the authors, of the said measures were inspired by an unlawful motive. Accordingly the Court does not consider that the circumstances were such as to rule out, at that time, action by the High Authority on the market in ferrous scrap with a view to affecting indirectly means of production using scrap.
b) The purpose of the provisions contested in the present application was to make the contribution for the equalization of the prices of imported ferrous scrap progressively selective by increasing the rate applicable to the consumption of bought scrap above a given reference level and by graduating the charges thereby imposed in terms of a specific input coefficient for ferrous scrap in the installations and the manufacturing processes requiring scrap. Furthermore the said provisions contain a set of transitional measures intended to permit undertakings to adapt themselves progressively to the conditions thereby created for them, in particular the choice by each undertaking of its own reference period, the period of six months during which payment of the contribution at the supplementary rate is suspended, the graduated nature of the rate, the allocation of a reference consumption and a specific input reference for plant which began operations during the year following the entry into force of the decision together with the allocation of a specific input reference without a time-limit for all plant beginning operations after the expiry of this latter period. Through those measures the High Authority provided the scheme for the equalization of the prices of imported ferrous scrap, which it had previously established, with conditions intended to prevent a fall in the price of ferrous scrap resulting from equalization from encouraging producers in the Common Market to increase their consumption of scrap. Thus defined the decisive aim of the contested provisions constitutes lawful indirect action, within the meaning of Article 57, applied to the market in ferrous scrap in order to ensure, bearing in mind the facts and circumstances then observed, regular supplies to the Common Market. The said aims are thus in accordance with the provisions of Article 3 (a) and the latter part of (d), the second paragraph of Article 2 and the third subparagraph of the second paragraph of Article 5 of the Treaty.
c) Pursuant to the beginning of Article 3, when the institutions of the Community carry out the tasks defined in the said article they must act in the common interest. The concept of the common interest referred to in Article 3, far from being restricted to the sum of individual interests of undertakings or of categories of undertakings subject to the jurisdiction of the Community, considerably exceeds the scope of such interests and is defined in relation to the general aims clearly laid down in Article 2. Consequently the protection of the common interest does not rule out, if the circumstances so require, that measures combining the pursuit of the various objectives described in Article 3 of the Treaty should include all selective and gradual measures compatible with the principle of equality and necessary to carry out the tasks laid down in that article. Consequently an indirect means of action on production cannot be considered as incompatible with the protection of the common interest on the pretext that it involves different treatment.
d) Nevertheless consideration must be given to the question whether the measures taken are compatible with the rules in Article 3 (b), the beginning of subparagraph (d) and subparagraph (g) and the applicant alleges that the High Authority's adoption of the said measures constitutes serious disregard of these objectives. Pursuant to Article 3 (b) of the Treaty the institutions of the Community are required, within the limits of their respective powers, to ensure in the common interest that all comparably-placed consumers in the Common Market have equal access to the sources of production; this provision constitutes a necessary objective for the action of the High Authority in the exercise of the powers conferred upon it by the Treaty. Failure to observe the principle of the equality of treatment of consumers in the matter of economic rules, as that principle has been described above, may constitute misuse of powers affecting the persons or classes of persons deliberately sacrificed. Pursuant to a principle generally accepted in the legal systems of the Member States, equality of treatment in the matter of economic rules does not prevent different prices being fixed in accordance with the particular situation of consumers or of categories of consumers provided that the differences in treatment correspond to a difference in the situations of such persons. If there is no objectively-established basis distinctions in treatment are arbitrary, discriminatory and illegal. It cannot be alleged that economic rules are unfair, on the pretext that they involve different consequences or disparate disadvantages for the persons concerned when this is clearly the result of their different operating conditions. The supplementary rate established under Article 3 (1) (b) of the contested decision applies generally and entirely to any consumption of bought scrap in excess of that relating to a reference period. The discretion conferred upon the undertakings subject to the scheme themselves to select, within specially prescribed temporal limits, the period most favourable to them does not, however, mean that the criterion used for distinguishing between them thus loses its objective nature, without which it would appear arbitrary. Indeed the factual differences which this situation entails for undertakings stem from their dissimilar operating conditions and not from any legal inequality inherent in the decision. The graduation of the contested supplementary rate laid down by the provisions of Article 8 is based exclusively on the successive periods for the application of Decision No 2/57. The graduation is thus general and absolute, objectively based upon the wish progressively to provide encouragement, by influencing prices, to steel undertakings consuming ferrous scrap to economize in using it so as to avoid its unconsidered exhaustion. The refunds of the proportion of the equalization contribution calculated at the supplementary rate, which were established pursuant to Article 9 of the disputed decision, are granted on a purely objective basis, the reduction of the specific input coefficient of ferrous scrap for each type of plant and manufacturing process using that material. The varying effects which the application of that article produces on the persons concerned, by reason of varying operating conditions and technical problems which, for certain categories of plant, may reduce or even exclude entitlement to refunds cannot render the rule inequitable in law — which is excluded by the nature of the criterion adopted.
e) Pursuant to Article 3 (d) and (g) of the Treaty the institutions of the Community, and particularly the High Authority in exercising the powers conferred upon it by Article 53 (b), are required to ensure the maintenance of conditions which will encourage undertakings to expand and improve their production potential and promote the orderly expansion and modernization of production and the improvement of quality. The High Authority refers to those legal objectives at the beginning of the disputed decision, the stated aim of which is to ensure regular supplies to the market in ferrous scrap and to encourage undertakings to save ferrous scrap without, however, making it more difficult to increase output capacity. The applicant association complains that the High Authority has seriously disregarded the objectives thus referred to by hampering, through the contested provisions, the development of certain methods of production. It must be considered whether the provisions indicate, in this respect, an unlawful motive or a serious lack of care amounting to failure to observe the purpose of the law and whether in this respect priority was perhaps accorded to certain lawful aims at the expense of certain others to an extent which is unjustified by the circumstances. The attainment of the objectives referred to in Article 3 (d) and (g) of the Treaty cannot be pursued in isolation from and without regard to the other objectives laid down in the said article. The attainment of orderly expansion and the modernization of production may lawfully be sought within the framework of a general action on the basis of reconciling the objectives of Article 3, if necessary granting such priority to one or other of them as appears necessary having regard to the situation arising from the economic facts or circumstances observed at the time of the intervention.
f) Furthermore the objectives laid down in Article 3 of the Treaty must be appraised as a whole and pursued exclusively in the common interest. Consequently, as has been stated, pursuit of the objectives prescribed in Article 3 does not rule out selective measures based in particular upon the nature of the means of production to be developed or created if it appears that economic circumstances and the reasonably foreseeable trend of market conditions call for such measures. This is certainly so when there are dangers of a serious shortage of one of the basic raw materials for the steel industry or if it appears necessary to adopt a policy of using resources rationally in order to avoid their unconsidered exhaustion. The distinctions which may consequently prove necessary to maintain conditions which will encourage undertakings to expand and improve their production potential and to promote its regular development nevertheless must be based upon purely objective criteria in accordance with the principle of equality laid down in the Treaty. The provisions of Article 6 of the contested decision are intended progressively to encourage steel undertakings to use scrap as rationally as possible. To attain this the provisions alter the cost of financing the equalization of the prices of imported ferrous scrap both in terms of the nature of the plant and manufacturing processes and the date when operations were commenced, through the combined action of reference consumption and refunds granted in respect of relative economies in scrap. The graduated increase in the cost of ferrous scrap and the selective influence thereof on the cost price of steel products vary in terms of objectively determined quantitative and qualitative criteria. Consequently the contested measures constitute with regard to the principle of non-discrimination, provisions encouraging undertakings to develop new capacities considered compatible with regular supplies of scrap for the steel industry and the orderly expansion of production. The provisions of Articles 6 and 8 of the contested decision thus constitute a body of progressive rules without which the financial arrangement established by the said decision would forfeit its character of an indirect means of action in relation to production thereby rendering it unlawful with respect to the provisions of Articles 5 and 57.
g) The ‘indirect means of action’ in relation to production prescribed in Article 57 are to be distinguished from the ‘direct influence’ referred to in the third subparagraph of the second paragraph of Article 5 not by the aims pursued but by the methods appropriate to attain them. Indirect means of action, by affecting, especially as a result of the financial arrangements under Article 53, certain of the factors which play a part in forming prices, create conditions which encourage undertakings freely and willingly to choose the behaviour desired by the High Authority for the accomplishment of the tasks with which it is charged under the Treaty. On the other hand direct influence, such as the allocation of resources for which provision is made in Article 59, is not concerned with how producers would behave if they acted freely but directly prescribes, on pain of fines, as is stated in Article 59 (7), the behaviour which the High Authority considers necessary with regard to the situation with which the Treaty requires it to cope. The two procedures, indirect and direct, are intended to modify the structures to which, unless modified by intervention, individual behaviour would give rise. The procedures thus both constitute procedures for economic intervention but the former create the right conditions to encourage producers freely to adopt the behaviour which the common interest, referred to in Article 3, requires of them whilst the latter impose upon undertakings in the same common interest behaviour other than that which they would be prompted to adopt by the actual circumstances. The indirect means of action are identical in their effects and in the power of intervention which they confer but make it possible for all those participating in the market to retain their freedom of decision whilst direct influence requires the limitation, if not the abolition, of such freedom. All the provisions of Article 6 of Decision No 2/57 are intended to make it possible for established situations to continue and to avoid the immediate and harsh resort to measures for the allocation of resources provided for in Article 59, in preference to which Article 57 prescribes indirect means of action. The provisions in particular with regard to ‘reference consumption of bought scrap’, ‘specific input references’, the period of exemption from contributions at the supplementary rate and the graduated nature of that rate are steps in accordance with the wish to respect that preference. With regard to ‘new plant’ it is true that, subject to the refunds for which it may qualify inasmuch as Article 6, at the end, grants a ‘notional specific input reference’, the price of ferrous scrap with which they are charged will in principle be higher. The same is true of ‘solid-charged electric furnaces’ in respect of which it can scarcely be anticipated that technical developments will bring about a notable reduction in their specific input of ferrous scrap. Nevertheless those findings do not affect the lawfulness of the system. In fact the lack of supplies and the increase in the price of ferrous scrap required the High Authority at one and the same time to encourage undertakings to reduce their consumption of ferrous scrap and to prevent the price of Community scrap from being fixed at the level of that of imported scrap. It was thus necessary to provide the equalization scheme with a supplementary contribution to counter the incentive to increased consumption of ferrous scrap which might have resulted from the fall in the price brought about by equalization. Although the High Authority wished at the same time to ‘promote a policy of using natural resources rationally and of avoiding their unconsidered exhaustion’, an objective laid down in Article 3 (d) of the Treaty, it also had to take into account the conditions appropriate to various categories of consumers and thus modify the application of the supplementary contribution imposed on the latter in accordance with the variations in their consumption of ferrous scrap. This modification entailed the gradual elimination of the effects of equalization, or even in certain cases their abolition. The contested scheme was thus intended above all to ensure a regular supply to the market and to promote a policy of using resources rationally. Nevertheless there are no grounds for asserting that, by according temporary priority to certain of the aims set out in Article 3, and consequently only partially reconciling all of the aims set out therein, the High Authority used the powers given it under the Treaty for purposes other than those for which they were conferred. Since misuse of powers has not been established this complaint must be rejected.
2. The complaint of misuse of powers in that the contested provisions are intended to effect an allocation
The financial arrangement in the contested provisions does not constitute, with regard either to its form or to its effects, the system of allocation described in Article 59 and in Annex II. In certain economic circumstances and subject to certain procedures, those measures authorize the allocation in tonnages of raw material resources to the various categories of possible consumers. The procedures thus provided for consist exclusively in establishing consumption priorities and allocating resources. Such activities are directly and solely of a quantitative nature and are thereby distinct from all indirect action on production by means of prices without restriction of the volume of purchases. Article 58 itself, upon which the applicant relies, concerns the establishment of a system of production quotas or the regulation of the level of activity of undertakings by appropriate levies on tonnages exceeding a reference level set by a general decision. It is further necessary to note the difference between the measures prescribed in cases of manifest crisis (Article 58) where the dominant idea concerns direct levies on tonnages, and the measures prescribed in cases of serious shortage (Article 59), where the concept of direct allocation of available resources predominates.
Accordingly the financial arrangement contained in the contested provisions does not constitute a system of allocation which may be treated as equivalent in its essential characteristics to the arrangement under Article 59 and Annex II.
The establishment of the supplementary contribution and the refusal of a reference consumption for plant and manufacturing processes put into operation after 31 January 1958 do not have such compelling force that they amount in practice to a system of allocation. They rather constitute means of intervention inherent in the financial arrangement itself which necessarily, by its very nature, affects the field of competition and production. None of the arguments put forward constitutes sufficient proof in law that in this respect the system may be treated as equivalent to the allocation for which provision is made in Article 59 and Annex II.
In the contested measures the High Authority was concerned to deal with a situation marked by extreme scarcity of ferrous scrap; in applying for this purpose the powers conferred upon it under Article 53 (b) of the Treaty it was acting in accordance with the provisions of Article 59 which provide that recourse shall only be had to the special procedure of quantitative allocation, even if a case of serious shortage has been duly found, if the means of action provided for in Article 57, amongst which the financial arrangements referred to in Article 53 must be classified, do not permit sufficiently effective action.
Furthermore, whilst the contested provisions are intended progressively to increase the cost of ferrous scrap in proportion to the quantities consumed and to graduate that cost so that it varies in terms of the type of plant and manufacturing processes using scrap, the applicant has failed to establish that the financial burden which this entails for the relevant indertakings is determined in such a way that the arrangement complained of must be considered as equivalent to a direct and specific arrangement for quantitative allocation or for regulating the level of their activity.
Furthermore, although the system set up does not constitute a system of allocation, even on the view that such a system might display certain characteristics of indirect allocation it would be necessary to prove that the objective of the contested decisions was to attain this allocation by means of Article 53 (b), through the expedient of a financial arrangement and contrary to the stated objective of effecting economies in ferrous scrap and ensuring a regular supply of scrap to the market, or else, to prove that the High Authority had been motivated by a wish to evade Article 59 or that, through a serious misconcetion it had failed to recognize that the contested arrangement amounted to an arrangement under Article 59.
Since this has not been sufficiently proved in law misuse of powers has not been established.
3. The complaint of misuse of powers in that the contested provisions are intended to prohibit certain investments
Article 54 of the Treaty confers upon the High Authority certain powers in co-ordinating investment programmes and in providing financial assistance in carrying out these programmes. Those powers must be exercised within the framework of the general objectives laid down in Article 46. Within such limits the powers are applied by the publication of programmes of general guidance in accordance with the common interest and by formulating individual opinions on the plans submitted to it by the undertakings.
The abovementioned provisions in no way impede the adoption of measures in accordance with the provisions of Articles 3, 5, 53 (b), 57 and 59 of the Treaty, taken together, the application of which may influence investments planned by undertakings. In particular the rules concerning prices laid down in Article 61 of the Treaty and, above all, the financial arrangements referred to in Article 53 (b), which the High Authority is entitled to use as an indirect means of action on production, entail by their nature results capable of affecting the plans of producers, and in particular their investment plans. It is consequently impossible to complain that the contested provisions, which are in accordance with the provisions of Articles 3 and 53 (b) read together, are vitiated by misuse of powers with regard to Article 54. The applicant has completely failed to establish that the High Authority's sole, or at any rate principal, purpose in having resource to the contested provisions was to evade the specific procedures prescribed in the said article.
Consequently the complaint of misuse of powers with regard to Article 54 must be dismissed.
4. The cow plaint of misuse of powers with regard to Article 4(c) of the Treaty in that the High Authority has imposed upon certain undertakings a special charge which is prohibited by the said article
The applicant is mistaken in relying upon the provisions of Article 4 (c) of the Treaty, which prohibit subsidies or aids granted by States or special charges imposed by States in any form whatsoever.
It is irrelevant in the present case to settle the question whether the High Authority is also prohibited from imposing special charges. In any case there can indeed be no special charge within the meaning of the said article when the High Authority, in making a financial arrangement of the kind provided for in Article 53 (b), imposes higher contributions upon certain undertakings than upon others since this unequal allocation of charges is based upon objectively-established criteria which are justified by the objectives which are properly pursued under the said arrangement.
Accordingly the complaint of misuse of powers with regard to Article 4 (c) of the Treaty must be rejected.
5. The complaint of misuse of powers with regard to Article 4 (b) of the Treaty in that the High Authority has established an unfair system for the undertakings since refunds are not available on the same terms to every undertaking and in respect of all kinds of plant
It has been established that the provisions complained of are based upon a criterion which is objectively adapted to the pursuit of the proper aim of the High Authority. Accordingly, such a system cannot be described as unlawful nor can it be stated that it distorts competition by placing certain undertakings at a disadvantage in relation to others.
Consequently the complaint based on the establishment of an unfair system with regard to the undertakings must be rejected.
6. The complaint of misuse of powers with regard to Article 65 of the Treaty in that by establishing the system amounting almost to a prohibition with regard to plant and manufacturing processes put into operation after 31 January 1958 the High Authority enacted measures which were more restrictive than their purpose required
It has been established above that the economic circumstances observed at the time of the High Authority's intervention on the market in ferrous scrap justified the enactment of the measures complained of with regard to the financial burden of equalization and that, in particular, these measures might properly include the establishment of a progressive rate and the allocation of the financial charge in terms both of tonnages consumed, of periods of consumption and of the nature of the plant.
Accordingly those measures are not more restrictive than is necessary for the purpose of the financial arrangement so that, even if Article 62 (2) (b) applied to them, the condition which it requires would be fulfilled.
Accordingly the complaint based on failure to observe Article 65 is irrelevant.
7. the complaint of misuse of powers with regard to Article 3 (e) of the Treaty in that the contested provisions give rise to acute and wide-spread social problems which must inevitably continue if the said provisions are applied
The applicant has not furnished further details of this complaint in the course of the proceedings nor has it supplied any proof of its allegation.
Consequently the complaint based on misuse of powers with regard to Article 3 (e) of the Treaty must be rejected.
Costs
Under Article 60 of the rules of Procedure of the court the unsuccessful party shall be ordered to bear the costs. In the present case the applicant has been unsuccessful with regard to the substance of the case and the defendant has been unsuccessful as regards admissibility. In accordance with the second paragraph of the said article the applicant must thus be ordered to bear four-fifths of the costs of the proceedings and the defendant to bear one-fifth.
Upon reading the pleadings; Upon hearing the parties; Upon hearing the opinion of the Advocate-General; Haying regard to Articles 2, 3, 4, 5, 33, 46, 47, 48, 53, 54, 57, 58, 59, 65 and 80 of the Treaty and Annex II thereto; Having regard to the Protocol on the Statute of the Court of Justice; Having regard to the Rules of Procedure of the Court of Justice and the rules of the Court on costs, THE COURT hereby: