JUDGMENT OF 17. 7. 1959 — CASE 42/58 SAFE v HIGH AUTHORITY
In Case 42/58
THE COURT composed of: A. M. Donner, President, 0. Riese (Rapporteur) and J. Rueff, Presidents of Chambers, L. Delvaux, Ch. L. Hammes, R. Rossi and N. Catalano, Judges, Advocate-General: M. Lagrange Registrar: A. Van Houtte
gives the following
JUDGMENT
Issues of fact and of law
I — Conclusions of the parties
The applicant claims that the court should:
‘Declare the following contested decisions void and of no legal effect in that they are illegal and unjustified as to substance: 1. The implied decision of refusal resulting from the absence of a reply for more than two months to the request for exemption addressed to the High Authority of the ECSC by letter of 23 July 1958; 2. In so far as necessary, the decision to postpone taking a decision resulting from the letter of 31 July 1958 addressed to the applicant undertaking by the High Authority; 3. On the ground that it is illegal, the general decision constituted by the letter of 18 December 1957 addressed by the High Authority to the Office Commun des Consommateurs de Ferraille (OCCF) (Joint Bureau of Ferrous Scrap Consumers) on the definition of the concept of “ferrous scrap from own resources” for the purposes of Decisions Nos 22/54, 14/55 and 2/57; Order the High Authority to bear the costs.’
The defendant contends that the Court should:
‘1. … 2. As regards the alleged implied decision of refusal resulting from the absence of a reply from the High Authority to the letter of 23 July 1958, rule that the High Authority was not required to grant the exemption requested and did not commit a misuse of powers in not granting that exemption, and accordingly dismiss the application; 3. Dismiss the application brought against the letter of 31 July 1958 as inadmissible, since it does not constitute a decision against which an application may be brought; 4. In addition, reject the objection of illegality raised against the letter of 18 December 1957 and the claim for annulment, in so far as necessary, of the letter of 17 April 1958; With all consequences at law, in particular as regards payment of fees, costs and all other expenses.’
II — Facts
The facts may be summarized as follows:
1) In its steel-works at Hagondange (Moselle) the applicant manufactures fine steel, using in part ferrous scrap supplied by the Regie National des Usines Renault (National Network of Renault Factories) (hereinafter called ‘Regie Renault’) at Billancourt (Seine), which is also the principal user of the steel produced by the applicant. Regie Renault is the owner of 99-5 % of the shares in the applicant company. Moreover, the applicant company and Regie Renault are united by close links as regards management and technical personnel and from the economic and financial point of view.
2) The applicant, considering that the ferrous scrap received from the workshops of Regie Renault was not ‘bought’ from a third party, but constituted ‘own resources’, did not declare it to the Caisse de Péréquation des Ferrailles Importees (CPFI) (Imported Ferrous Scrap Equalization Fund), which was informed thereof by its inspectors. The High Authority took the view that the said ferrous scrap did not constitute ‘own resources’ for the purposes of the scheme for the equalization of imported ferrous scrap, and in particular for the purposes of Decision No 2/57, but did indeed constitute ‘bought ferrous scrap’. It referred generally to this point of view in its letter of 18 December 1957, addressed to the OCCF and published in the Journal Officiel of 1 February 1958, p. 45 et seq. In particular it stated that an undertaking is defined by its company name and that it is only ferrous scrap recovered by itself in its own establishments, bearing the same company name, that can be considered as ‘own resources’. On the basis of this definition, the CPFI informed the applicant that the ferrous scrap coming from Regie Renault should be assessed to the equalization levy. However, no levy was charged to the applicant because the applicant had omitted to deduct certain tonnages which the CPFI itself considered as own resources.
3) In its aforementioned letter of 18 December 1957, the High Authority, withdrawing its earlier reservations, had in addition approved two exemptions to the scheme resulting from its definition of ‘own resources’ in favour of Breda Siderurgica S.p.A. of Sesto San Giovanni (Italy) and Koninklijke Nederlandse Hoogovens en Staalfabrieken NV of IJmuiden (the Netherlands). In a letter addressed to OCCF on 17 April 1958 and published in the Journal Officiel of 13 May 1958, p. 30 et seq., it explained that those exemptions had been granted because the works of the undertakings concerned ‘are integrated locally with … works not belonging to them, in which the ferrous scrap is recovered. That local integration results from the fact that the works (in question) form … a single industrial group’. However, it added: ‘Although organic ties exist between the undertakings owning the works at Sesto San Giovanni and IJmuiden, the granting of the exemptions has been based exclusively on the criterion of local integration’.
4) By letter of 23 July 1958 addressed to the High Authority, the applicant submitted a request for exemption in respect of the ferrous scrap which it received from Regie Renault. It received no answer other than a letter from the Director of the Market Division of the High Authority, dated 31 July 1958, stating that the said request was ‘under study’.
III — Submissions and arguments of the parties
The submissions and arguments of the parties may be summarized as follows:
1. Admissibility
A — Was the application against the letter of 31 July 1958 from the Market Division of the High Authority lodged within due time?
As the application was lodged on 17 October 1958, the defendant raises the objection of inadmissibility, on the ground that the time-limit laid down in the third paragraph of Article 33 of the ECSC Treaty and in Article 85 of the Rules of Procedure of the Court of Justice of the ECSC was not observed. The letter in question was entered with the date of 1 August 1958 in the High Authority's register of outgoing mail. Therefore, in order to accept that the application was made in due time, it is necessary to suppose that the post was abnormally slow.
The applicant declares that it is unable to verify the date on which the letter arrived and merely replies that ‘on general principles’ it is up to the administration from which the decision has emanated to prove that the time-limit has not been observed.
B — Does the letter of 31 July 1958 constitute a decision?
According to the defendant, such is not the case, as the letter does not create an obligation for the applicant. Hence the applicant cannot raise the objection of illegality against the letters of 18 December 1957 and 17 April 1958.
The applicant replies that the said letter does indeed constitute a decision to postpone adopting a decision and, therefore, a decision to maintain the levy. It thus involves an obligation for the undertaking.
2. Substance
A — The action for failure to act
The defendant denies that it was under an obligation to take a decision in the sense meant by the applicant (first paragraph of Article 35), that is, to grant it an exemption. Further, it denies having committed a misuse of powers by omitting to take such a decision (second paragraph of Article 35).
a) It was not obliged to grant the exemption, because the applicant is not in the same situation as Breda and Hoogovens, since its works are not integrated locally with those of Regie Renault.
b) The application does not contain any element calculated to show that the High Authority has committed a misuse of powers affecting the applicant. In fact, since the letter of 18 December 1957, the High Authority has not adopted a position on any request for exemption. Therefore the applicant has not been subjected to any special treatment. Moreover, until such time as the High Authority adopts a decision ordering the applicant to comply, the withholding of a decision on the request for exemption cannot prejudice the applicant.
In this connexion, the applicant refers to its explanations concerning the High Authority's letters of 18 December 1957 and 17 April 1958. From those explanations it appears that those letters and, as a consequence, the individual decisions made under them including the implied decision of refusal, are not only vitiated by infringement of the Treaty, but also involve a clear misuse of powers affecting the applicant.
B — The application for annulment and the objections of illegality
(a) Lack of competence
The applicant refers to the judgments delivered by the Court in Cases 9/56 and 10/56 (Impresa Meroni & Co., Industrie Metallurgiche, S.p.A. v High Authority, and Impresa Meroni & Co., Industrie Metallurgiche v High Authority) and which annulled certain individual decisions based on General Decision No 14/55, on the ground that the latter was incompatible with the Treaty, having delegated an excessively wide discretionary power to the Brussels agencies. Since the contested individual decisions are also based on Decision No 14/55, they must be annulled for the same reason.
The defendant replies that the decisions contested in the present application emanate directly from the High Authority. There is no analogy between them and the measures annulled by the said judgments, the latter measures having originated in a delegation of powers granted to the Brussels agencies.
(b) Failure to state reasons
The applicant argues that the letter of 31 July 1958 is vitiated for the same lack of reasons as the Court found in the aforesaid judgments in Cases 9/56 and 10/56. The letter at issue does no more than confirm earlier letters, which included a formal assessment to the levy. Yet the latter were not accompanied by the essential data, as the CPFI had not told the applicant what tonnage was assessable and at what rate.
The defendant replies that the letter of 31 July simply stated that the request for exemption was under study by the High Authority. It is hard to see how such information needed to be explained. Moreover, as the applicant itself admits, its complaint is directed only against letters that it has not contested.
(c) Infringement of the Treaty and misuse of powers
The applicant complains that the defendant has established a definition of ‘own resources’ which is too narrow. In fact, in order to distinguish ‘bought ferrous scrap’ from ‘own resources’, the criterion of the company name is too limited, and the exceptions admitted by the defendant ought not to have stopped at the criterion of ‘local integration’, but ought to have included ‘technico-economic integration’ such as between the applicant and Regie Renault.
1) The application of the concept of ‘bought ferrous scrap’ to the tonnages delivered by Regie Renault is erroneous. The truth is that there is no purchase and sale, but rather an exchange. In the relationships between the two undertakings, the purchase and sale prices ‘are merely prices fixed for convenience. They can even be fixed arbitrarily and on a flat-rate basis at a given rate in no way connected with the real market rate’.
2) The restrictive interpretation which the defendant gives to the concept of company name in its letter of 18 December 1957 is contrary to the aims of the Treaty which refers primarily to economic market concepts and does not intend to hamper industrial groups. The trend of modern law is towards an improved adaption of legal concepts to concrete realities. Where there is an economic integration such that, just as in the present case, the prices fixed between the members do not have any repercussion on the market prices, one has ‘an economic phenomenon’ in the scientific sense of the term. The defendant has indeed realized that the criterion of the company name was too narrow, for in its letter of 17 April 1958 it abandoned that criterion in favour of the criterion of ‘local integration’. That decision does not involve a mere tidying up of the rule laid down in the letter of 18 December 1957, but it is an addition to it in that it takes industrial groups into account. However, it is vitiated by illegality because it is too limited. In effect, the decision must be interpreted as meaning that, amongst the circumstances which are evidence of the existence of economic ties between several undertakings, local integration alone is to be taken as justifying exemption from the levy. That interpretation arises from the fact that the undertakings to which the exemptions were granted, Breda and Hoogovens, form economic entities with the undertakings with which, in addition, they are locally integrated. Such a difference in treatment, which excludes integrations so clear-cut as the one which exists between the applicant and Regie Renault, is arbitrary and discriminatory. It gives an added advantage to certain undertakings which, since they do not have to bear the transport costs of the scrap which they use, are already in a privileged position and, on the other hand, it worsens the situation of the applicant. Thus, instead of establishing competitive balance, the defendant has accentuated the existing imbalance. The decisive element is not whether the machines, works and services are situated at the same place and whether or not they come under the control of the same undertaking, but whether the material, having started from a point A in the state of arisings—in the present case the Renault factories—comes back to the same point A as a finished product after manufacturing and processing. Where such is the case, it must be exonerated from the levy; where such is not the case, it is assessable. Such is the answer to the question where a group starts and finishes. The criterion of local integration is calculated to favour activities by undertakings which are not entirely scrupulous and to encourage the practices prohibited by Article 67. It also seems that in adopting the contested criteria the defendant was influenced by the desire to facilitate and to reduce its inspections, a purpose which is not in the public interest.
3) The defendant is wrong in arguing that the reason why Regie Renault has kept the applicant with a distinct legal personality is that the interested parties expected certain advantages and should, conversely, bear the less favourable consequences. The decision to sever the applicant undertaking from Regie Renault was taken in order to obtain improved productivity. It would therefore be contrary to the purposes of the Treaty to oblige the interested parties to proceed to a merger. For all these reasons, the contested decisions create discrimination between undertakings placed in equivalent conditions and infringe the principle of free competition laid down by the second paragraph of Article 2 and Articles 3 (b) and 5 of the Treaty. In addition they constitute a misuse of powers because the purpose achieved is contrary to the purpose of the financial arrangements and of the Treaty itself.
The defendant points out the essential purpose of the financial arrangements in question. It is to make possible the importation of ferrous scrap at prices comparable with those charged within the Community, so as to maintain normal conditions of competition between undertakings. The interpretation of the concept of ‘own resources’ should have regard to that purpose in order that each undertaking shall bear a fair share of the levy imposed. The definition chosen is beyond criticism. For in legal language, ‘own’ things are described as those which belong to the ‘owner’. It follows that an undertaking can only consider as own resources ferrous scrap recovered in its own establishments, carrying the same company name. In addition, the definition has the advantage of being easy to apply and thus of preserving the principle of equality between undertakings.
1) The applicant and Regie Renault are two different legal persons. Therefore, movements of goods occurring between them require contracts which contain all the elements of a contract of purchase. They are made at a given price. If this were only a ‘price of convenience’ the productivity of the applicant's factory could not be established on a realistic basis, although to do so was, as the applicant has itself admitted, one of the very reasons for its legal separation from Regie Renault. One cannot talk in the present case of a mere exchange of finished products against ferrous scrap. It is not entirely true to say that the applicant only receives ferrous scrap from Regie Renault and it does not sell its products exclusively to the latter. However, exchange, like sale, is a contract involving an obligation. In fiscal law, an exchange is treated at one and the same time as a purchase and a sale.
2) The criteria suggested by the applicant, namely ‘technico-economic integration’ and ‘group ferrous scrap’ are much too vague. Furthermore, they are in contradiction with Article 2 of the decisions instituting the financial arrangements. According to those decisions ‘the undertakings defined in Article 80 of the Treaty’ shall be subject to the contribution. The fact that the material returns to the point of departure cannot be decisive, for that would lead to unacceptable consequences. In particular, own arisings recovered by manufacturers and re-sold to the steel industry would be exempt from the levy, even in the absence of any integration between the undertakings concerned. If the defendant were to accept the applicant's suggestion, it would in many cases have to exempt from the contribution ferrous scrap circulating between undertakings which form a group. What would then happen to the equalization scheme? The scrap delivered by Regie Renault to the applicant is not totally distinct from the scrap bought on the free market; its price must in practice follow market fluctuations. Finally, the applicant's proposition would result in placing undertakings which do not form part of a group in unequal competitive positions. For all these reasons, the letter of 18 December 1957 is justified. The same is true of the letter of 17 April 1958. The applicant is wrong in interpreting it as a ‘rectification’ which substitutes for or adds to the criterion of the company name that of the ‘industrial group’. The purpose of the letter was simply to state the reasons which justified the exemptions granted to Breda and Hoogovens, namely the fact of local integration. It even takes the care to state that it is not economic integration as such which is decisive. Although the expression ‘industrial group’ was used, this was exclusively in the geographical sense. There is no contradiction between the two letters, for the second constitutes an exception which confirms the rule adopted in the first. Furthermore, this exception is perfectly justified. Unity of plant location is a criterion which is easy to test and easy to apply. The criterion also accords entirely with common sense, because the works in question form a compact block without its being possible to distinguish where the property of one owner begins and that of another finishes. The danger mentioned by the applicant, namely that unscrupulous undertakings could artificially achieve local integration in order to evade equalization, is extremely hypothetical. The defendant opposes the assertion that it adopted the contested definition for reasons of administrative convenience.
3) The applicant itself admits that Régie Renault, in granting legal autonomy to it, expected several advantages. It is natural that the contested party should also bear the disadvantages which, as regards the levy on ferrous scrap coming from Régie Renault, are of no great consequence. In short, since the applicant is not in a situation identical to the situation of the undertakings to which exemptions were granted, the High Authority is not guilty of any discrimination.
Grounds of judgment
Admissibility
1. Was the application against the letter from the Market Division of the High Authority of 31 July 1958 lodged within the prescribed period?
It is only ‘in so far as necessary’ that the applicant contests that letter, which it describes as a ‘decision to postpone taking a decision’.
If the letter of 31 July 1958 constitutes a decision, that fact must affect the decision of the Court on the action for failure to act because the applicant could not then substantiate the argument that the defendant did not adopt any decision within the period of two months subsequent to the applicant's letter of 23 July 1958. Therefore the admissibility of this application should be examined.
The defendant raises the submission of inadmissibility on the ground that the application against the letter of 31 July 1958 was not lodged within the prescribed period. The registered office of the applicant is in Paris, that is, in Metropolitan France. Therefore, under the third paragraph of Article 33 of the ECSC Treaty and Article 85 (1) and (2) of the Rules of Procedure of the Court of Justice of the ECSC, the period within which the applicant had to contest the said letter expired one month and three days from the day following notification thereof.
The application was lodged at the Court Registry on 20 October 1958. Accordingly, it was only made within the prescribed period if the letter of 31 July 1958 only reached the applicant on 17 September 1958 at the earliest.
The applicant, upon being asked questions about this by the Court, did not supply any explanation. However, the defendant formally declared that the said letter was entered in its register of outgoing mail under the date of 1 August 1958. That statement has not been contested by the applicant. Nevertheless, it has not been possible to establish the precise date on which the said letter reached the applicant.
However, it would seem unreasonable to suppose that a letter sent from Luxembourg on 1 August 1958 and which the applicant admits having received did not reach Boulogne-Billancourt to which it was addressed, before 17 September 1958. Accordingly, it is established that the application against the letter of 31 July 1958 was not lodged within the prescribed period.
Therefore, this application is inadmissible.
2. Is the action for failure to act admissible?
The defendant does not raise any objections as to the admissibility of the action for failure to act, in that it admits that no decision was adopted within the period of two months laid down in the first paragraph of Article 35 of the ECSC Treaty. That question however, must be examined by the Court of its own motion.
The only answer to the applicant's letter of 23 July 1958 whereby it lodged a request for exemption with the High Authority was a letter from the Director of the Market Division of the High Authority dated 31 July 1958 stating that the question was ‘under study’. That letter does not constitute a decision within the meaning of the Treaty.
There was, therefore, an implied decision of refusal as meant by the aforesaid Article 35. The action brought against that decision was clearly within the prescribed period.
The action for failure to act is therefore admissible.
Substance
1. Can the applicant raise an objection of illegality against the letters of the High Authority of 18 December 1957 and 17 April 1958?
According to the established case-law of the Court, an undertaking which contests an individual decision is entitled to raise the objection of illegality against the general decisions on which they are based. The parties are in agreement about the fact that the implied decision of refusal resulting from the absence of a reply for more than two months from the High Authority to the letter from the applicant of 23 July 1958 is based on the principles set out in the abovementioned letters of the High Authority; and such indeed is manifestly the case. The question therefore arises whether those letters constitute decisions.
(a) Does the letter of 18 December 1957 constitute a decision?
The letter from the High Authority dated 18 December 1957 states a general principle in that it refers to the definition of the concept of ‘own resources’ regarding ferrous scrap.
That letter was published in the Journal Officiel of 1 February 1958 and thus brought to the notice of all the undertakings of the Community.
It was described as a ‘decision’ by the Market Division, in a letter of 19 February 1958, in answer to a formal question made by the Deutsche Schrottverbrauchergemeinschaft to the High Authority on 6 February 1958.
Nevertheless, contrary to the applicant's arguments, the said letter of 18 December 1957 cannot legally be considered as a decision within the meaning of the Treaty.
Admittedly, the letter of 18 December 1957 was in answer to a request from the OCCF, whose members had failed to agree on the meaning of the words ‘own resources’, and which had therefore called upon the High Authority to define that concept pursuant to the second paragraph of Article 15 of Decision No 2/57. But the High Authority replied that the problem thus expressed by the OCCF ‘was wrongly put’, in view of the fact that the OCCF had ‘from the beginning by implication adopted the concept of own resources according to the semantic meaning of the term’, and that that criterion should be maintained.
It follows that the High Authority did not intend to take a decision, as it had been formally invited to do, but simply to reaffirm the principle which, rightly or wrongly, it considered to emerge logically from the basic Decision No 2/57.
This finding is confirmed by the fact that by Article 53 (b) of the Treaty an amendment to Decision No 2/57 would have required the prior unanimous assent of the Council of Ministers, and that condition was not fulfilled in this case. Moreover, there is nothing to suggest that the High Authority knowingly disregarded that binding requirement.
These considerations are not invalidated by the fact that, in answer to a formal question from the Deutsche Schrottverbrauchergemeinschaft to the High Authority on 6 February 1958, the Market Division replied by letter of 19 February 1958 that the letter of 18 December 1957 was indeed a ‘decision’.
In fact, that answer from the Market Division expresses, as it itself says, the opinion of an official of the High Authority and does not necessarily of itself reflect the intentions of the High Authority in the matter.
However, the various subjective elements set out above cannot of themselves be decisive in determining the nature of the said letter of 18 December 1957, for the nature of a measure depends primarily on its subject-matter and content.
The said letter appears as being an internal instruction addressed by an immediate superior to the department under his charge and intended to orientate the activities of that department.
Thus, while the letter may have given rise to immediate obligations, it can only have done so as regards the agency to which it was addressed and not as regards undertakings consuming ferrous scrap. This view of the matter, moreover, is supported by the fact that the said letter of 18 December 1957 was only published in the Journal Officiel on 1 February 1958.
Therefore the letter of 18 December 1957 is not a decision within the meaning of the Treaty.
(b) Does the letter of 17 April 1958 constitute a decision?
Generally, the considerations developed above in respect of the letter of 18 December 1957 are equally valid for the letter of 17 April 1958.
More particularly, its purpose is only to explain to the OCCF the reasons why the High Authority, in its letter of 18 December, approved the exemptions granted to two specific undertakings, saying that the works of those undertakings were ‘locally integrated with one or several works not belonging to them, in which ferrous scrap is recovered’.
Thus the letter does not set out a new principle, but merely expressly states a principle which the administration has already applied by implication in implementing Decision No 2/57.
Therefore the letter of 17 April 1958 does not constitute a decision within the meaning of the Treaty.
2. May the Court examine the legality of the principles set out in the letters of 18 December 1957 and 17 April 1958?
From the moment when the principles set out in the abovementioned letters were applied by the administration, they formed part of the interpretation and application of Decision No 2/57.
The High Authority's interpretation has affected the applicant's rights from the moment when the agencies to which the letters of 18 December 1957 and 17 April 1958 were addressed applied that interpretation in respect of it.
The question should therefore be examined whether the interpretation of Decision No 2/57, as it appears from the letters of 18 December 1957 and 17 April 1958, is legal.
3. Is it legal to subject group ferrous scrap to equalization?
a) Article 2 of Decision No 2/57 provides that ‘undertakings of the kind described in Article 80 of the Treaty which consume ferrous scrap shall be assessable to payment of contributions’ under the equalization scheme. Article 4 of the same decision states that those contributions shall be calculated on the basis of supplies of ‘bought ferrous scrap’ whereas ‘own resources’ shall be exempt from equalization. The deliveries of ferrous scrap to the applicant Regie Renault constitute purchases, because there is an agreement for the passing of property against a price. By reason of the fact, according to the wording of Decision No 2/57 such scrap is subject to equalization. The applicant requests exemption, taking the view that group scrap should be assimilated to own resources. It is therefore necessary to examine whether such assimilation is justified.
b) As appears from a reading of the letter of 18 December 1957, the High Authority interprets the concept of ‘own resources’ as meaning that it is only scrap recovered by an undertaking in its own establishments bearing the same company name that is considered as ‘own resources’, whereas scrap supplied by a works run under another company name is considered as bought scrap, even in the case where close financial or administrative links exist between the supplier and the user.
c) However, it is necessary to examine whether the assessing of group scrap to the levy—and the exemption for own arisings—is compatible with the purposes of the financial arrangement constituted by the equalization system.
i) According to the applicant, there is no valid reason for subjecting group scrap to the equalization system, because the operations between the various affiliated undertakings take place outside the market in ferrous scrap and do not, by reason of that fact, exercise any influence on the evolution of prices. According to the applicant, the purpose of equalization is to maintain the prices of ferrous scrap at a reasonable level, so that any transfer of scrap not liable to have repercussions on the level of prices must be exempted from equalization. In fact, the purpose of equalization is to maintain the price of ferrous scrap at an acceptable level; however, in order to achieve that objective, the High Authority has established financial arrangements the principle of which is to ensure that the excess price of imported ferrous scrap is borne by all the consumers of ferrous scrap. It is not participation in the ferrous scrap market which gives rise to the equalization levy, but the consumption of ferrous scrap. All consumers are therefore automatically required to pay equalization contributions in order to finance the equalization fund. Therefore, this complaint put forward by the applicant must be rejected.
ii) However, Decision No 2/57 provides for a distinction between bought ferrous scrap and own resources, and this constitutes, as regards the latter, an exception to the general rule mentioned above. It is therefore necessary to examine whether the exoneration of own resources is legal. That exception primarily concerns own arisings from the production of steel by the undertakings subject to the jurisdiction of the Community. If those arisings were subject to equalization contributions, there would be a probability of charging the same quantity of ferrous scrap twice over, which would be manifestly unjust.
d) The reasoning set out above is confirmed by the concept of discrimination as it appears in particular from the second paragraph of Article 2 and Articles 3 (b), 60 and 67 of the Treaty.
i) On the basis of the abovementioned provisions there may be considered as discriminatory in principle and, accordingly, prohibited by the Treaty, inter alia, any action or intervention, even one emanating from the High Authority, which is calculated, by substantially increasing differences in production costs otherwise than through changes in productivity, to provoke an appreciable disequilibrium in the competitive position of the undertakings concerned. In other words, any intervention attempting to distort or actually distorting competition artificially and significantly must be regarded as discriminatory and incompatible with the Treaty, whilst measures which take into account the internal organization of an undertaking and the use by it of its own resources cannot be regarded as discriminatory. The use of its own arisings by a single undertaking producing steel and using ferrous scrap amounts to a production re-cycling of one of its by-products. This being so, such a use in the process of the production of steel from ferrous scrap clearly represents an increase in the quantity of steel obtained from the same quantity of ferrous scrap, which has already been subjected to equalization. It thus represents an acquired increase in productivity. To say that an intervention encouraging those internal measures of economy distorts competition is the very opposite of the truth. Such an intervention favours changes in productivity in the direction of greater productivity, by the form of competition described in German as ‘Leistungswettbewerb’, and therefore accords with the Treaty. Moreover it appears from Annex II to the ECSC Treaty, second paragraph of (b), that ‘undertakings’ own arisings' enjoys privileged treatment even in the case of a direct intervention under Article 59 of the Treaty. Therefore a fortiori they must also receive privileged treatment in the application of indirect measures of intervention such as those authorized by Article 53. It follows from everything that has been said above that the exemption of own resources is not discriminatory and is therefore legitimate.
ii) To assimilate group scrap to own arisings would be to go beyond the meaning of and the reason for the exemption and would constitute a discriminatory advantage as regards other undertakings. The lowering of production costs consequent upon an exoneration for group scrap would, in the words of Article 67 of the Treaty, be liable substantially to increase differences in production costs as between those undertakings and those which also produce steel from ferrous scrap but which are not integrated with an undertaking producing that raw material. That increase in the differences in production costs would not result from changes in productivity, but would be the effect of contingent, geographical, administrative or financial ties, which are at the basis of the concept of a ‘group’. It must be observed from the scheme of the Treaty and from its fundamental principles that the word ‘productivity’ refers exclusively to the results of the effects made by an undertaking. In particular, it must be understood as distinct from and as against any improvement in the competitive position of an undertaking which is due either to interventions of public authorities, or to the creation of a cartel or a concentration, because all these operations, even where authorized or capable of being authorized, artificially alter the normal affect of competition.
e) It would be manifestly contrary to the requirements of the Treaty if, as a result of an intervention on the part of the High Authority, the production costs of steel manufactured in whole or in part from ferrous scrap were to depend on the legal, administrative or financial structure of industrial groups. The changes in the legal structure of the group, the existence of which is stressed by the applicant, only go to show that such changes are arbitrary and available upon a moment's notice, and to prevent there being seen therein any factor specific to the productivity of the steel-producing undertaking.
f) For all these reasons, although the exoneration of own arisings is compatible with the provisions of the Treaty, an exoneration for group scrap would bring about discrimination prohibited by Article 4 of the Treaty. In view of that fact, the latter exoneration must itself be taken to be prohibited by the Treaty, without its being necessary, in the present case, to rule on the question whether or not ferrous scrap originating from an undertaking which is not a producer of steel and is not, therefore, subject to the jurisdiction of the Community should, for that reason, be exempt from equalization, even if it forms part of a group with the undertaking using the ferrous scrap or is run under the same company name. It results from the foregoing considerations that the defendant acted legally in applying the principle that so-called group ferrous scrap must be considered as bought ferrous scrap and, therefore, as subject to equalization, and in reaffirming that principle in its letter of 18 December 1957.
4. The arguments based on the exemptions already granted.
The applicant has also alleged that the High Authority has exonerated certain undertakings in so far as they consume ferrous scrap from works which, without bearing the same company name as the consumer works, are ‘locally integrated’ with the latter.
However, the applicant has not raised the question whether such exonerations are compatible with the purpose and the scheme of the equalization system.
Moreover that question cannot be decided in the context of the present dispute.
The fact that the High Authority or its departments may, in certain cases, have given too wide an interpretation of the concept of ‘own arisings’ cannot justify the grant of an exemption from the levy in other more or less comparable cases, since such grant is contrary to the very principles of the equalization system.
On those grounds, since the request for exemption submitted by the applicant is unfounded, its action for failure to act in respect of the implied decision of refusal must be dismissed.
Costs
Under the terms of Article 60 (1) of the Rules of Procedure of the Court of Justice of the ECSC, the unsuccessful party shall be ordered to pay the costs.
In the present case the applicant has failed in all its submissions. It must therefore be ordered to bear the costs.
Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties; Upon hearing the opinion of the Advocate-General; Having regard to Articles 2, 3, 4, 15, 33, 35, 53, 59, 60, 67 and 80 of the ECSC Treaty and Annex II thereto; Having regard to the Protocol on the Statute of the Court of Justice of the ECSC; Having regard to the Rules of Procedure of the Court of Justice of the ECSC, in particular Articles 60 and 85, THE COURT hereby:
1 Dismisses the application directed against the implied decision of refusal resulting from the absence of a reply for more than two months by the defendant to the applicant's letter of 23 July 1958 as unfounded;
2 Dismisses the application directed against the letter from the Market Division of the High Authority of 31 July 1958 as inadmissible.
3 Orders the applicant to bear the costs.