Judgment of the Court 28 April 1966 Ferriere e Acciaierie Napoletane SpA v High Authority of the European Coal and Steel Community

In Case 49/65

THE COURT composed of: Ch. L. Hammes, President, L. Delvaux, President of Chamber, A. M. Donner, R. Lecourt and R. Monaco (Rapporteur), Judges, Advocate-General: J. Gand Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Summary of the facts

The facts which form the basis of the dispute may be summarized as follows:

1) As a result of the inspections and checks carried out, in 1958 and 1962, by the Société Fiduciaire Suisse on Ferriere e Acciaierie Napoletane (hereinafter referred to as FAN), the quantity of assessable ferrous scrap consumed by the latter was, in the first instance, assessed at 41343 metric tons. This assessment was the subject of a letter addressed to the applicant by the High Authority on 8 April 1963. Both that letter and Decision No 7/63 of the High Authority were contested by the FAN before the Court of Justice. The relevant application 57/63 was dismissed on 9 June 1964 as inadmissible.

2) In the course of proceedings, the parties came together and discussed the possibility of carrying out new checks. The applicant produced documents concerning the points at issue and an expert's report was obtained. As a result of these checks and discussions, the High Authority took the decision of 19 May 1965 which is contested by the present application.

3) According to that decision, the quantity of assessable scrap consumed by FAN between April 1954 and November 1958 is 34300 metric tons. On the basis of its foregoing declarations and the checks carried out by the High Authority, the applicant admits that in the course of the said period it consumed 21769 metric tons, that is to say:

17003 metric tons declared for the period April 1955 to January 1957,

4766 metric tons admitted to have been consumed in the period from April 1954 to March 1955.

4) The difference between the tonnage declared by the FAN and that found and checked by the High Authority is thus 12531 metric tons. The question at issue between the parties bears essentially on whether this tonnage consists entirely of ‘alloy scrap’, exempt from the equalization scheme. Exactly 10965 metric tons of ferrous scrap are concerned, allocated thus:

8344 metric tons consumed between April 1955 and November 1958,

2621 metric tons consumed between April 1954 and March 1955.

II — Conclusions of the parties

The applicant claims that the Court should:

‘1. Pursuant to Article 33 of the Treaty, annul the individual decision of 19 May 1965; 2. Pursuant to Article 34 of the Treaty, if necessary refer the matter back to the High Authority for it to take the necessary steps within its competence to comply with the judgment, including the refund of any sums wrongly paid and the payment of fair compensation for the loss suffered as the Court deems fit; 3. Order the High Authority to pay the costs; 4. As a measure of inquiry, admit the annexed documents and order the High Authority to produce the complete file of documents on the assessment of the purchases of ferrous scrap concerning the Acciaierie Napoletane company, reserving the right if necessary to request additional measures of inquiry.’

The defendant contends that the Court should:

‘Dismiss all the heads of the application and order the applicant to pay the costs of the proceedings.’

III — Submissions and arguments of the parties

The submissions and arguments of the parties may be summarized as follows:

Admissibility

The defendant raises no objection with regard to the admissibility of the application.

Substance

1. Infringement of essential procedural requirements and of the rules of the Treaty, especially Articles 3(b), 4(b), 5 and 53; infringement of the rules of law relating to the application of the Treaty arising from the general principles of the national law of the Member States concerning the burden of proof; infringement of the rules relating to the application of the equalization scheme and especially Decision No 2/57; misuse of powers The applicant emphasizes that the basic general decisions on equalization are restricted to imposing on the undertakings the obligation to declare the movements of ferrous scrap and have not laid down in addition that of supplying documents in support of these declarations. At the time the applicant complied with that obligation, by addressing to the competent authorities the declarations relating to its consumption of ferrous scrap, wherein were shown the quantities of ‘alloy scrap’ received. This was the time when the High Authority, if it considered it necessary, should have required the undertaking concerned to prove that the disputed ferrous scrap was alloy scrap. The applicant, whilst not disputing the High Authority's right to correct or check undertakings' declarations, does not admit its right to require the production, after several years (in this instance between 11 and. 7 years), of evidence for which it could have asked when the disputed facts were declared, the more so since in absence of such a request undertakings considered that their declarations complied with the requirements prescribed at the time. The High Authority's claim is thus not only contrary to the provisions laid down at the time, but is also vitiated by misuse of powers. The defendant replies that, since in this case the assessments in question relate to a period before 1958, the basic provisions are those of Article 12(1) and Article 16(1) to (4) of Decision No 2/57, which concern the fixing of the amount of contributions owed by each undertaking. These provisions moreover do not specify the procedure or the power whereby the High Authority shall calculate the amount, but are limited to providing that each undertaking under its control shall inform the High Authority of the movements of ferrous scrap and that the High Authority shall notify the undertakings concerned of the result of this calculation. In these circumstances, it is evident that in interpreting these provisions account must be taken of the general principle whereby, in the absence of provisions to the contrary, the grant of a specified power implies the grant of all other powers essential for the proper exercise of that power. It thus follows that the High Authority has the power to make inductive corrections and to dispute the accuracy of the facts notified by the undertaking concerned. Instead of making any fresh provision, Article 2 of Decision No 13/58 only confirms that conclusion, empowering the High Authority inductively to fix the amount of the contribution (cf. also Article 1 of Decision No 14/58). Certainly, the High Authority must always proceed on the basis of exact information; but, unless the undertaking is in a position to prove sufficiently in law that the High Authority's calculation is based on wrong information, or that it actually purchased the declared scrap, the results arrived at by the High Authority must be considered as definitive. All these principles, already recognized by the Court, especially in the Judgment in Case 18/62, have as their logical corollary that it is the undertakings' duty, under the rules in force since the scheme was set up, to assemble valid documents and to retain them as long as may be necessary in order to dispute the amount of the contributions claimed and to prove the exact quantities of ferrous scrap purchased (cf. Judgment in Case 108/63). The applicant replies that it in no way disputes that the High Authority may make all the checks and corrections necessary to determine the equalization charge. It considers however that the High Authority has been dilatory and superficial in its findings, and that it pursued an illegal aim in its choice of the most appropriate methods for determining the equalization charge due by each undertaking: instead of choosing methods which would have given exact results, it preferred to adopt methods which showed higher consumptions of ferrous scrap. This explains, for example, the adoption of the criterion based on the consumption of electricity which had subsequently to give way to that based on the number of actual working days. The High Authority's attitude led it to reject the designation of ‘alloy scrap’ for the tonnages in dispute. Its behaviour reveals its basic preoccupation with maintaining the balance between the credits and debits of the equalization scheme, by the methods most suited to avoid, so far as possible, the amendments necessary to the general budget of the equalization funds which the correction of certain calculations would involve. The contested measure is thus vitiated by misuse of powers. Moreover, according to the defendant's argument on the scope of Articles 12 and 16 of Decision No 2/57, it must be noted that the very fact that these provisions are limited to providing for the undertakings' obligation to supply the High Authority with the information asked for, and that they do not lay down any procedure for implementing the check carried out by the High Authority, gives no proper grounds for concluding that the undertakings were also under an implied obligation to gather up all the necessary documents in advance. If these provisions are flexible with regard to the High Authority, they must also be flexible with regard to the undertakings. The High Authority ought thus to have assumed the accuracy of the applicant's declarations and of the periodic records of the movements of alloy scrap contained in the books of accounts, the more so since the undertaking would certainly not have dared to enter in these books incorrect figures with regard to the tonnage of scrap received, as these tonnages could not be used swiftly, and the accuracy of the figures could have been determined at any time by a check on the stocks. The High Authority's behaviour is even contrary to the rules governing the burden of proof, as it is a fundamental principle both of private law, under which part of the equalization scheme comes, and of public law, that the burden of proof rests on the party which alleges the disputed facts (‘avanza la pretesa’). This principle is subject to exceptions in the sphere of public law, but these exceptions must arise from an express provision and not be created by the administration simply by means of an executive measure. It thus follows that, if undertakings which have not made their declarations are put under an obligation to prove the inaccuracy of the checks carried out by the High Authority, then by the same token it is for the High Authority to prove any inaccuracy in the undertakings' declarations. At a more practical level, it must moreover be explained that the exemption of alloy scrap from the equalization contribution was contemplated from the outset of the equalization scheme. In fact the High Authority by implication gave retroactive effect to Article 10 of Decision No 2/57, which provided for that exemption. This Article was limited to providing for the undertakings' obligation to state the type of scrap thus exempted, and did not require any proof in support of the statement. Only alter Resolution No 17 of 24 April 1958 by the Caisse de Péréquation des Ferrailles Importées (The Imported Ferrous Scrap Equalization Fund, hereinafter referred to as ‘the Fund’) were the undertakings notified that, after 1 May 1958, they must give reasons for classification as alloy scrap in the invoices relating to its purchase. But this resolution can by no means be interpreted as modifying the provisions of Decision No 2/57, considered above, either for past or future transactions. The applicant did not fail after the entry into force of the said resolution, to append to its declarations invoices proving the nature of the alloy scrap. But these documents cannot also be required with regard to the past, because of the physical impossibility of producing them at several years' remove, and of the lack of any legal provision for such an obligation. The High Authority's conduct would thus burden the undertakings unlawfully with the consequences of its own failure to take action. The defendant objects in its rejoinder that the discussion on the burden of proof is misplaced here. On the one hand, it was only where the applicant indicated the content in other metals of the ferrous scrap in dispute that it was possible to consider whether its statements required proof or if they must be presumed correct. On the other hand, if it is admitted, as it was admitted in the Judgment in Case 18/62, that the High Authority may carry out checks by inductive methods, it must ipso facto be concluded that the burden of proof does not rest on it. With regard to the argument that the obligation to justify the nature of the alloy scrap was first provided for the Resolution No 17 of the Fund, the defendant notes that this resolution made no innovations in that field, but simply adopted a practice which has since become general. The defendant contends that levying the equalization contribution comes within the sphere of private law, and furthermore defines its attitude to the submission of misuse of powers, emphasizing that it is not supported by any sound argument, and that it is indeed weakened by some of the arguments on which the applicant relies.

2. Infringement of the provisions, principles and rules cited in the foregoing submission; infringement of essential procedural requirements; failure to give a sufficient statement of reasons; misuse of powers The applicant recalls that the contested decision refusing to accept the disputed tonnages as being alloy scrap is based on the following considerations: (a) The FAN's type of production does not require the use of alloying constituents; (b) The prices of the disputed ferrous scrap were the same as those of ordinary scrap; (c) The disputed ferrous scrap was not used as alloy scrap; (d) There is no mention of the alloy content in the invoices relating to the purchase of the disputed quantities. It consequently makes the following observations. With regard to heads (a) and (c) In the first place, the very fact that the High Authority admitted, on the basis of certain invoices and of an expert's report that the applicant used at a given time quantities of alloy scrap bars these two considerations from being sufficient reasons for the contested measure. Secondly, in this instance the purchase of alloy scrap for use as ordinary scrap may be fully explained, by reason of: the dearth of ordinary scrap on the market in Naples at the time; the parity of prices of alloy scrap and of ordinary scrap on this market. In these circumstances, even if the use of alloy scrap involved higher costs than the use of ordinary scrap, from an economic point of view it was more advantageous, owing to the additional costs which would have been involved in obtaining supplies of ordinary scrap on distant markets and to the exemption of alloy scrap from the equalization scheme. The advantage to the applicant of the use of alloy scrap is moreover proved by the increased quantities of this type of ferrous scrap purchased after 1958. Why then should it have thrown away that advantage in the previous years? With regard to head (b) In the first place, it must be noted that the parity of the prices of these two types of ferrous scrap on the market in Naples is due to the structure of that market, especially during the period under review. The lack of foundries producing alloy steel, the availability of that ferrous scrap created by undertakings using semi-finished products of alloy steel purchased elsewhere, and the very high costs which would have been involved in transporting these materials northwards, are the principal causes of that parity. In the second place, it should be remembered that the FAN had already proved by an official certificate given by the Naples Chamber of Commerce that on that market there were no separate calls for ordinary scrap and for alloy scrap, and the parity of the prices is confirmed by a certificate given by the same Chamber, the veracity of which cannot be called in question as long as it has not been judicially denied. Taking account of all those factors and of these certificates, it is incomprehensible that the High Authority could have concluded in its decision that by reason, inter alia, of the parity of prices the ferrous scrap in dispute was ordinary ferrous scrap. With regard to head (d) Since the difference between alloy scrap and ordinary ferrous scrap was of no importance on the market in Naples, from a commercial point of view, there was no reason to indicate the alloy content in the invoices relating to the purchase of alloy scrap. The fact must not be lost sight of moreover that an entry for alloy scrap in the invoices relating to purchases was never required before 1 May 1958, the date of the entry into force of Resolution No 17 of the Fund, where it is furthermore stated that ‘previous declarations, which do not correspond to the rules applied in practice, will be considered individually, case by case’. This must be interpreted to mean that on the basis of that communication the undertakings were legitimately entitled to hope to have the declarations which they had made previously considered individually, so that it is now impossible to impose the burden of proof on them. The applicant has moreover produced in support of its declarations concerning the purchases of alloy scrap, certificates issued by a certain number of suppliers. These certificates were issued at a time when the official definition of ‘alloy scrap’ was known: the definition was moreover restricted to giving concrete form to a terminology already extremely widespread. If the High Authority doubted the accuracy of these certificates, it ought to have checked it by inquiries made of those providing the certificates. This check was not effected at the time of the inspections of 1958 and 1962. If the proof which it requires with regard to the quality of the ferrous scrap in dispute has now become physically im possible, the undertakings must not be made to suffer the consequences. The applicant then gives the following information: Assessment of the ferrous scrap in dispute would artificially increase the production costs of the FAN, which had expected to offset the higher production cost which it entailed, by the exemption available for this ferrous scrap. This increase would result in worsening the FAN's competitive capacity and constitute a discrimination against it; Although the equalization contribution is not of the nature of a tax, the principles governing the fiscal authorities' power to check or correct taxpayers' returns are by analogy applicable to this case. Pursuant to these principles, it is admissible to call again into question at any moment the accuracy of the declarations of those coming under the equalization scheme; The contested decision restricts itself, in the statement of reasons, to stating briefly that the undertaking was unable to prove the composition of the disputed ferrous scrap designated as ‘alloy scrap’ and does not take account of the arguments put forward by the FAN and of the documents which it had produced. This attitude is due to the High Authority's constant concern to balance the Fund's budget; The defendant's refusal to comply with the FAN's request for the production of all documents relating to the nature of the ferrous scrap in dispute clearly proves the weakness of its argument. These documents show clearly that the reasons why the High Authority recognized as alloy scrap certain quantities of ferrous scrap (864 metric tons) would have led it to the same conclusion with regard to the disputed quantities. The applicant ends by noting that the foregoing considerations refer to the whole of the disputed alloy scrap, that is, 10965 metric tons of ferrous scrap. The defendant opposes the applicant's attempt to divide the reasoning of the contested measure into separate parts, instead of considering it as a whole. Thus, the statement that the High Authority took its decision on the essential ground that the undertaking was unable to prove the nature of the alloy scrap is based on an artificial analysis of that decision. After recounting the obstacles placed by the FAN in the way of the High Authority's checks, the High Authority arrived at its conclusions on the basis of several factors and of a check which was not only deductive, but inductive. It then proceeds to observe that the presence of other metals does not suffice for the ferrous scrap to be considered as alloy scrap. For this it is necessary that the content in other metals should attain specified percentages. These percentages were shown by Resolution No 17 of the Fund of 24 April 1958. But the applicant itself does not dispute that the undertakings were already acquainted with these percentages, since the said resolution merely adopted criteria and sanctioned a practice already extremely widespread. For these reasons therefore, it is clearly a necessary condition of the High Authority's accepting the ferrous scrap as being alloy scrap that the alloy content should be known. In the same way as ferrous scrap which, whilst containing other metals, does not attain the percentages laid down as necessary by the High Authority, may be considered as ordinary scrap, similarly, and on much stronger grounds, ferrous scrap, containing unknown percentages of other metals, cannot be considered as alloy scrap. The applicant supplied the necessary information with regard to two deliveries of ferrous scrap which the High Authority accepted as being alloy scrap, in 1956 and in 1958; but it has produced no like information with regard to the quantities of ferrous scrap in dispute. In these circumstances, exempting the ferrous scrap in dispute from the equalization scheme would have tended to cause a discrimination against the other undertakings coming under it to the detriment of those which properly established the nature of their alloy scrap. It is incorrect to assume that in this case the content in alloying elements cannot be stated owing to the considerable lapse of time since the purchases of ferrous scrap were declared. First, it emerges from the declarations made by certain firms (for example, Bonada), for purchases between 1955 and 1957, that in 1958 all these deliveries had only recently taken place, and that a number of them even related to the same products as those in the present case, so that it was possible to show the content in alloying elements of them all, and especially the latter. Secondly, the very fact that, according to the applicant, there were no distinct markets for alloy scrap and ordinary scrap would rather prove that, since the two types of ferrous scrap were the same from an economic point of view, it had never been felt necessary to analyse their content so that the lack of any indication, even a posteriori, of the content in alloying elements of the disputed ferrous scrap arose essentially from this circumstance. Finally, from the technical point of view, the claim that the applicant purchased the alloy scrap in order to avoid the equalization scheme presupposes that, for the reasons set forth above, it would have had to arrange an analysis of that ferrous scrap to be able to obtain such an exemption. That analysis was all the more indispensable as it was necessary to know the percentage of other alloying metals in the ferrous scrap both in order to calculate the level of the production cost and to select the technical methods for preventing the presence of other metals from having detrimental effects on the quality of the steel. For these reasons, if the applicant has produced no analysis, it is because the ferrous scrap in dispute was ordinary scrap, or else contained a minimum percentage, technically and economically insignificant, of other metals. The defendant finally points out that in any event, according to Resolution No 17 of the Fund, the criteria for classifying ferrous scrap as alloy scrap were three in number: The ferrous scrap must have been purchased by an undertaking producing alloy steels; The analysis of the ferrous scrap must prove the existence of a specified percentage of other elements; The invoices must show the increases in price resulting from the presence of other metals. The applicant did not satisfy any of these criteria with regard to the ferrous scrap in dispute. With regard to the FAN's request for an inquiry and for the production of all the documents relating to the assessment of the disputed ferrous scrap, the defendant considers that, since the subject in dispute has been amply debated by the parties, with an expert's report as well, these measures would merely cause delay.

3. The claim for damages under Article 34 of the Treaty The defendant observes that this claim is drawn up in extremely general terms, and is not supported by any line of argument. Neither the fault of the High Authority, nor the alleged damage, nor a connexion of cause and effect between these two factors has been proved.

IV — Procedure

The written procedure followed the normal course. On the report of the Judge-Rapporteur, the Court, having heard the Advocate-General, invited the parties to lodge by 15 February 1966, a copy of Resolution No 17 of the Council of the Fund, adopted on 24 May 1958.

The parties complied with that request on 14 and 15 February 1966.

The parties presented their oral explanations at the hearing on 22 February 1966.

The Advocate-General delivered his opinion at the hearing on 22 March 1966.

Grounds of judgment

Admissibility

The admissibility of the application is not disputed by the defendant and there are no grounds for the Court to raise the matter of its own motion.

The application is therefore admissible.

Substance

The contested decision found that the applicant had not proved that the ferrous scrap in dispute was alloy scrap, and that its declarations relating to the purchase of that ferrous scrap were not confirmed by sufficient supporting documents.

The applicant claims in the first place that such a requirement infringes the general rules of the Treaty with regard to financial arrangements and the principles of law in force in the Member States with regard to the burden of proof; since the general decisions relating to the scheme for the equalization of ferrous scrap imposed on the undertakings the sole obligation of declaring their purchases of ferrous scrap, these declarations must be held to be true until the contrary is proved. Moreover the High Authority cannot after several years require the production of evidence which it could have required when the disputed facts were notified. In the absence of such a request, the undertaking was entitled to consider that its declarations complied with the requirements at the time. In these circumstances, the High Authority's requirement is moreover vitiated by misuse of powers, since it imposed a higher contribution on the applicant solely because the latter did not append to its declarations documents which it was not required to produce.

Pursuant to the general decisions establishing the equalization scheme the ‘ferrous scrap from alloy steels’ is exempt from contributions, so long as it contains a specified percentage of alloying elements.

It is clear from Questionnaire 2/50 of the ECSC, used since December 1954 by the undertakings, that since the establishment of the equalization scheme they had been in a position to know these percentages.

The applicant supplied the High Authority with a certain amount of information which, in its opinion was such as to prove that the ferrous scrap in dispute was alloy scrap.

That information was considered insufficient by the contested decision, on the ground that it did not fulfil the three conditions set out in Resolution No 17 of the Council of the Imported Ferrous Scrap Equalization Fund, which entered into force on 1 May 1958.

Under that resolution only ferrous scrap purchased by undertakings producing alloy steels, containing a specified percentage of alloying elements with the price of the alloying elements separately shown in the purchase invoices and with an entry for their average content is deemed to be alloy scrap.

The applicant maintains that the criteria deduced from the nature of the steels produced and from the level of the prices of the alloy scrap cannot be upheld in this instance.

In this connexion it claims that large quantities of alloy scrap were at the time being offered on the market in Naples, at prices identical with those of ordinary scrap.

Since the higher production cost which the use of alloy scrap entails was offset by its exemption from the equalization charge, the purchase of alloy scrap at the same price would have been as advantageous as that of ordinary scrap.

In support of that claim the applicant produces a certificate from the Naples Chamber of Commerce showing that at the time large quantities of alloy scrap were on offer on the market there at the same price as ordinary scrap.

The defendant has disputed neither these claims nor the validity of the said document.

Moreover, it has recognized as alloy scrap 864 metric tons of ferrous scrap regarding which the applicant has shown the content in alloying elements, but which do not comply exactly with the aforementioned criteria.

In this case the sole reliable criterion for deciding the accuracy of the applicant's declarations regarding the ferrous scrap in dispute is thus that of the indication of the average content in alloying metals.

In these circumstances, it must be considered whether in this case the High Authority was justified in requiring absolute compliance with that criterion, as it is set forth in the abovementioned Resolution No 17.

As opposed to the French text, the Italian text of the said resolution does not mention the obligation on the undertakings to indicate the average content in alloying metals on the invoices relating to purchases of alloy scrap.

It is agreed that only the Italian text was notified to the Italian undertakings, which include the applicant. The resolution provides moreover that declarations made before its entry into force will be the subject of investigation case by case.

The actual provisions of the abovementioned resolution only render it binding on the undertakings concerned from 1 May 1958.

It is not therefore possible to insist on observance of the resolution with regard to ferrous scrap purchased and used before that date.

The applicant's declarations regarding the purchase of the ferrous scrap in dispute go back to a period before 1 May 1958. The High Authority ought therefore to have checked whether these declarations were well founded on the basis of a variety of factors pertaining to the case in question, without insisting on a strict observance of the formalities described in the said resolution, and especially on the indication of the average content in alloying metals.

Consequently, since the contested decision refused to consider the ferrous scrap in dispute as alloy scrap exempt from equalization, it is not justified and must be annulled.

The applicant moreover claims that the High Authority should be ordered to pay such compensation as the Court considers equitable.

The applicant supplies no information with regard to the existence or the amount of the damage alleged.

This part of the claim must therefore be rejected.

Costs

Under the first paragraph of Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs if they have been asked for in the successful party's pleading. The defendant must therefore be ordered to pay the costs of the present action.

On those grounds, 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 15, 33, 34, 47 and 53 of the Treaty establishing the European Coal and Steel Community; Having regard to the Protocol on the Statute of the Court of Justice of the European Coal and Steel Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities, especially Article 69 (3); THE COURT hereby:

1 Annuls the Decision of the High Authority of the European Coal and Steel Community of 19 May 1965 concerning the applicant's financial obligations within the framework of the scheme for the equalization of imported ferrous scrap and scrap treated as such;

2 Orders the defendant to pay the costs.

1 Language of the Case: Italian.

2 CMLR.