JUDGMENT OF 16. 6. 1966 — CASE 50/65 ACCIAIERIE SOLBIATE v HIGH AUTHORITY

In Case 50/65

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 — Facts

The facts may be summarized as follows:

Acciaierie e Ferriere di Solbiate (hereinafter referred to as ‘Solbiate’) is a company incorporated in 1955 by Emilio Bertone, who is also the owner of the Metalsider undertaking, and by his son, Guido, who owned an interest in that undertaking. On the incorporation of Solbiate, Metalsider was trading in general metal products and ferrous scrap.

The applicant company states that its activities in the field of iron and steel began in February 1957. During that year, it sent to Campsider of Milan its first declarations regarding its consumption of ferrous scrap. On Form 2/50 it declared its initial stocks of ferrous scrap at 1 February 1957 to be 1300 metric tons and its consumption of ferrous scrap for the period February 1957 to November 1958 to be 7866 metric tons.

On the basis of these declarations by letter of 8 April 1963 the High Authority sent the applicant a provisional statement of account concerning this period which showed a credit of 4090686 lire in favour of Solbiate.

Following certain investigations the High Authority reached the conclusion that the applicant had carried on its activities in the field of iron and steel even before February 1957. It estimated the consumption of ferrous scrap at 2434 metric tons for the period June 1956 to January 1957 and at 13399 metric tons for the period February 1957 to November 1958. The defendant states that the applicant did nothing to facilitate these investigations, with the result that, by decision of 18 December 1962, it was ordered to pay a fine of 2494087 lire which is at present subject to enforcement proceedings.

By letter of 17 December 1963 the High Authority sent a further statement of account to the applicant, showing a debit of 41457965 lire against Solbiate.

In the light of the objections made by the applicant and the expert appraisal agreed on by the parties, the High Authority amended its previous calculations. It estimated consumption at 1475 metric tons for the period June 1956 to January 1957 and at 9102 metric tons for the period February 1957 to November 1958. By letter of 26 March 1965, the High Authority notified the applicant of the result of the expert appraisal and the fresh statement of account which reduced the debt owed by Solbiate to 5882957 lire.

The applicant did not reply to this letter.

On 19 May 1965 the High Authority adopted two individual decisions of which one determines the total quantity of scrap consumed by Solbiate whilst the other requires that company to pay the above-mentioned debt to the Imported Ferrous Scrap Equalization Fund.

On 24 June both decisions were notified to the applicant which lodged its application against them on 28 June 1965.

II — Conclusions of the parties

In its application, the applicant claims that the Court should:

‘(a) By means of interim measures and a preparatory inquiry, order the High Authority to produce the file concerning the debit position of the applicant company; (b) On the substance of the application, annul the contested individual decisions and, as far as necessary, the basic Decisions Nos 2/57 and 7/63; (c) In accordance with Article 34 of the Treaty, refer the matter back to the High Authority for it to take the steps necessitated by the annulment applied for, including the repayment of any sums overpaid, with the relevant interest, and the payment of such damages as the Court shall see fit to order; (d) Order the High Authority to pay the costs of the action.’

In the course of the proceedings, the applicant maintained only its conclusions in favour of the annulment of the individual decisions of 19 May 1965.

The defendant contends that the Court should:

‘Dismiss all the claims made by the SpA. Acciaierie e Ferriere di Solbiate in the application of 27 July 1965 against the two individual decisions of 19 May 1965 and order the applicant to pay the costs.’

III — Submissions and arguments of the parties

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

Admissibility

The defendant observes, first, that the submission of misuse of powers raised by the applicant against the decision requiring it to pay the sums owed by way of equalization is inadmissible, since the factors put forward in its support concern a different submission, that of the infringement of an essential procedural requirement regarding the statement of reasons for the decision.

Secondly, it puts forward an objection to the admissibility of the conclusions claiming the annulment of general Decisions Nos 2/57 and 7/63, on the ground that the applicant's claim that these decisions are illegal does not entail the annulment of the measure considered to be irregular.

Thirdly, it maintains that the conclusions referring to the payment of damages are inadmissible in that they are not supported by any argument establishing the existence of a wrongful act or omission on the part of the High Authority, or of any damage caused to the applicant as a result thereof.

If the damage in question proved to be that suffered by a creditor as a result of delay in the payment of sums owed to him, the system of credit interest established by Decision No 7/61 is already a sufficient remedy.

Finally, the defendant again states that the application to suspend the enforcement of the contested individual decisions is inadmissible in that it was not made by a separate document in accordance with Article 83(3) of the Rules of Procedure.

The applicant merely observes that the objections put forward by the defendant can only refer to the first submission of the application, by which it requested the Court to give a ruling on two related individual decisions, referring in support to the infringement of certain rules of law relating to the application of the Treaty.

In the rejoinder, the defendant, whilst maintaining these objections, concludes that in the course of proceedings the applicant withdrew the submissions previously put forward, with the exception of that referring to the decision fixing the tonnages of bought scrap consumed by the applicant, to the extent that the decision in question regards as ferrous scrap subject to the equalization levy that consumed by the undertaking during the period from June 1956 to January 1957.

Substance

1. Infringement of Articles 3, 4, 5 and 6 of general Decision No 2/57 of 26 January 1957 and of other provisions concerning the concept of ‘bought scrap’ The applicant maintains that, by treating as bought scrap the stocks with which the Solbiate company began its activities, the High Authority failed to appreciate the fundamental principle of the ferrous scrap equalization scheme, which is established by Articles 3 to 6 of general Decision No 2/57. This scheme in fact only concerns transfers of ownership of scrap against a cash payment. Transfers which involve no payment, but only the transfer of the actual ownership of the ferrous scrap between two companies with the same members, are outside the scheme. This applies in particular to such cases as the present in which the company formerly exercising ownership ceases to exist and a new undertaking, constituted by the same family group, succeeds it: in such a situation there is no transfer of assets, but rather the substitution or succession of a collective personality for an existing undertaking, or the transformation of a private undertaking into an incorporated undertaking. The defendant replies that the concept of ‘purchase’ put forward by the applicant introduces into the equalization scheme new factors capable of altering the balance between undertakings and of endangering the principle of equality in the payment of levies on which this scheme is based. In order to define this concept correctly, it must not be forgotten: that the Community legislature used the terms ‘bought scrap’ or ‘scrap purchased’ in the basic general decisions without referring to the concept of purchase as accepted by the law of contract, but solely in order to distinguish ferrous scrap subject to the equalization levy from that which is exempt; that the concept of consumption of bought scrap, as established by Article 4(3) of Decision No 2/57 enables the conclusion to be drawn that the bought scrap consumed is composed of scrap purchased and received as well as that already in stock, to the exclusion of ‘own resources’. Bringing the discussion into the field of national law and after emphasizing that the Court is not called upon to apply this law and that taking account of national legal systems may lead to discrimination which is contrary to the very principle of equalization, the defendant states that, according to the Italian Civil Code, contributions made in kind by members in constituting the capital of a company must be shown in the document of association and their value must be expressed therein. In this instance, the statutes of Solbiate only refer to monetary contributions to the company capital. Apart from the conclusions which, according to the Civil Code, must be drawn from this fact, it could not be maintained that the sum of 750000 lire paid by Emilio Bertone is consideration for the quantities of ferrous scrap in dispute, since this sum is quite out of proportion to the commercial value of the scrap which was, at that period, 26 million lire. It states, finally: that to its knowledge Campsider never gave the applicant an assurance that the stocks of ferrous scrap in dispute had been treated as ‘own resources’; that the Metalsider company, which owned the ferrous scrap in dispute, did not become the Solbiate company and was thus not absorbed by it, but maintained its separate personality, as is shown by the ‘registro delle ditte’ of the Milan Chamber of Commerce. The applicant states that, in his position as owner of the Metalsider private undertaking, Emilio Bertone carried on, with his son who had an interest therein, a trade in general metal products and ferrous scrap. In 1955 the two partners set up the Solbiate company and thus ceased to deal in ferrous scrap in order to begin activities in the field of iron and steel. This is the same Bertone family group which, ceasing to be a dealer, became a consumer of ferrous scrap and, in this new capacity, at first used its own scrap, that is, those stocks which were available at Metalsider before the incorporation of the Solbiate undertaking. The Metalsider company continued in existence after the incorporation of the Solbiate company only to trade in metal products. As regards its trade in ferrous scrap, however, it ceased its activities and was absorbed by Solbiate. When, after a period of installation and commissioning which lasted from June 1956 to January 1957, this company began its industrial activities, it made a declaration to Campsider to the effect that the quantities of ferrous scrap in dispute were its initial stocks. In accordance with the usual practice and a proper interpretation of the brief provisions in force, initial stocks were regarded as exempt from equalization. It is true that the statutes of the company do not show any formal contribution of ferrous scrap, in accordance with Articles 2342 and 2343 of the Italian Civil Code, but the defendant itself acknowledges that the Court is not called upon to apply national law. The Court must decide the case on the basis of Community law and in particular of the rules relating to equalization. In doing so, however, it must not lose sight of the economic facts which show, in this instance, that a certain stage the Bertone family used the ferrous scrap, which it had available, in its furnace, instead of selling it. This being so, it cannot be claimed that the exemption of the ferrous scrap in dispute from the payment of the equalization levy infringed ‘the principle of equality in the payment of levies’. It would be unrealistic to deny that, as regards competition, the family undertaking established by the Bertone family and the company formed by the same group are not one single entity. From a practical point of view they are the same persons who, from being formerly dealers and owners of stocks of ferrous scrap, have become producers of iron and steel. In order to secure the dismissal of the application, the High Authority must show that, as a result of the exemption in dispute, the Bertone family would have received more favourable treatment than other producers of iron and steel: it is here that there arises the problem of the rules to be applied to stocks of ferrous scrap for the purposes of assessment to the equalization levy. The considerations set out by the defendant on this point on the basis of Article 4(3) of decision No 2/57 are not relevant since this paragraph refers to the method of calculating the consumption of bought scrap during the reference period referred to in Article 6, in relation to which excess consumption must be calculated. The provisions applicable in this case are those of paragraphs (1) and (2) which show how to calculate the total consumption of scrap during a given period and the consumption of bought scrap during the accounting period. These provisions show that: ferrous scrap drawn from stocks existing at the beginning of each accounting period shall not be taken into consideration in assessing the contribution relating to that period; the stocks of ferrous scrap available at the beginning of each period shall be taken into consideration in assessing the contribution relating to the preceding period, to the extent that such stocks are in excess of those existing at the beginning of that period; the stocks of ferrous scrap available at the beginning of the first accounting period shall not be taken into consideration in assessing the contribution payable. If, therefore, those undertakings existing on the entry into force of the equalization scheme were not bound to pay contributions on the consumption of ferrous scrap drawn from stocks available at that period, it must also be admitted that undertakings which began their activities after the entry into force of this scheme are not bound to pay contributions on those stocks which they had available when the furnaces were first charged. Not to accept this would be to create an imbalance between those undertakings already in existence and those subsequently set up, which would infringe the principle of non-discrimination. The defendant considers that the basic problems raised by this submission concern: the links between Metalsider and Solbiate; the scheme to be applied to stocks of ferrous scrap as far as equalization is concerned; the need to avoid all discrimination between undertakings existing on the entry into force of the equalization scheme and those subsequently established, as regards the exemption of stocks of ferrous scrap. (a) On the first problem it observes that, according to the case-law of the Court (Judgment in Joined Cases 42 and 49/59), the concept of an undertaking may be identified with that of a natural or legal person. This being so, as a private undertaking and a company limited by shares each have their own legal personality they could not form one single undertaking within the meaning of the Treaty. The applicant's contention that Metalsider continued in existence only for the trade in metal products is incorrect. It is clear from the ‘registro della ditte’ of the Milan Chamber of Commerce that the activities of this undertaking concern the ‘trade in iron and steel products and the demolition of scrap in bulk’. (b) On the second problem the defendant again sets out the need to distinguish between, first, ‘bought scrap’ or ‘scrap purchased’ and, secondly, ‘consumption of scrap purchased’. On this point it emphasizes that, with the exception of ferrous scrap sold or transferred to third parties, ‘scrap purchased’ is subject to equalization as soon as it is received by the purchaser. As in certain cases this scrap is not used immediately but is put into stock, it is important to avoid a second assessment being made when it is put into the furnace. It is for this purpose that a distinction is made between ‘scrap purchased’ and ‘consumption of scrap purchased’ and this is why, in Article 4 of Decision No 2/57, the legislature has provided that for the purposes of assessing the equalization contribution payable the consumption of purchased scrap must be calculated for each accounting period, by deducting the reduction in the stocks from the total consumption. Article 4 is thus a special provision as compared with Article 3 of Decision No 2/54 and Articles 2 and 3 of Decision No 14/55 which set out the scheme applicable to scrap purchased: its purpose is in fact to avoid the double assessment of bought scrap by using the criterion of actual consumption. In this instance it is clear that the applicant: has ‘consumed’ the ferrous scrap in dispute (which the calculations of the High Authority put at 1475 metric tons); has ‘purchased’ this same scrap. The applicant cannot claim to withdraw this ferrous scrap from the equalization scheme by designating it, on its own initiative, as scrap forming part of the ‘stock’. As the quantities assessable have been checked by the High Authority by means of various methods of calculation, such a claim is quite unjustified. The applicant's argument that the ferrous scrap subsequently used by Solbiate was already owned by Metalsider on the entry into force of the equalization scheme is quite unacceptable. Even if, by modifying its case-law, the Court were to acknowledge that Metalsider and Solbiate form one single legal person, this argument would still be inadmissible, since it is not supported by any evidence and does not correspond to economic realities. It is indeed absolutely inconceivable that the Bertone family, whose business activities evolved rapidly in the course of several years from the field of trade to that of production, kept a capital in ferrous scrap amounting to approximately 26 million Italian lire tied up over a long period. (c) Finally, on the question of possible discrimination, the defendant states once more that this presupposes the existence of comparable situations and the application of different rules to the same subject. In this instance, the position of those undertakings which purchased ferrous scrap before the entry into force of this financial scheme cannot be compared to that of the undertakings which purchased the same product after that date. The former were required to pay a price which had been unaffected by equalization, while the latter benefited from the effects of this scheme on the market prices. This being so, the application of uniform treatment to all undertakings would in fact create a discriminatory situation detrimental to those in the first category mentioned above. Moreover, ferrous scrap purchased before the entry into force of this financial scheme (1 April 1954) would not in this case be exempt from payment of the equalization contributions. There is no evidence for the statement to the contrary made by the applicant which is, in any case, contradicted by the fact that Solbiate only came into being in August 1955. Finally, the defendant wishes to emphasize that the treatment applied in this instance to Solbiate was also applied to all other undertakings in an identical or comparable situation and that, therefore, it would be impossible to accept the applicant's argument without discriminating between these undertakings.

2. Misuse of powers having regard to the illogicalities inherent in Decision No 7/63 In its application, the applicant asked whether the statement of account sent to it by the contested individual decisions is final or provisional. It concluded that, if it were final, the statement was illogical and irregular since it was based on a provisional measure of general application (Decision No 7/63). As the defendant has explained in its statement of defence that the contested decisions contain an implied reservation as regards subsequent statements of account, the applicant stated in its reply that it no longer insisted on this point and explained that in its view the first submission was alone sufficient to render the application admissible.

IV — Procedure

The written procedure followed the normal course.

Upon hearing the report of the Judge-Rapporteur and the view of the Advocate-General, the Court decided not to undertake any preparatory inquiry and fixed 22 February 1966 for the opening of the oral procedure.

The parties agreed at this hearing to waive their right to make oral submissions in order that the Court give judgment on the basis of the documents produced and the conclusions set out in the written statements.

The Advocate-General delivered his opinion at the hearing on 18 May 1966.

Grounds of judgment

Admissibility

In the course of the proceedings the applicant withdrew all conclusions other than those claiming the annulment of the individual decisions of 19 May 1965.

Furthermore, as a result of explanations supplied by the High Authority regarding the justification for the second submission, the applicant puts forward solely the infringement of rules of law relating to the application of the financial arrangement for the equalization of imported ferrous scrap and scrap treated as such.

The defendant has not contested the admissibility of the application and no grounds exist for the Court to raise the matter of its own motion.

The application is therefore admissible.

Substance

The applicant maintains that the High Authority, having regarded as bought scrap stocks of ferrous scrap used by the Solbiate company at the commencement of its activities, failed to appreciate the fundamental principle upon which the financial arrangement for the equalization of ferrous scrap is based, in particular Articles 3 to 6 of Decision No 2/57.

According to this principle, for the purposes of assessing bought scrap, the financial arrangement relates only to transfers of ownership in consideration of a price;

this is particularly so in those cases in which the company formerly exercising ownership ceases to exist and is succeeded by a new company formed from the same family group.

In this instance, it is claimed, as the applicant and the Metalsider undertaking, the former owner of the ferrous scrap in question, are both constituted by the same family group, it must be accepted that at the beginning the group utilized the stocks which it had available at Metalsider, with the result that no transfer of ferrous scrap within the meaning of this financial arrangement can be said to have taken place between the two undertakings.

In accordance with the general decisions establishing the financial arrangement for the equalization of imported ferrous scrap, scrap purchased and consumed by undertakings carrying out activities in the field of iron and steel is subject to equalization.

Although general Decision No 22/54 refers to the concept of purchase, this reference is explained in particular by the need to distinguish assessable scrap from that exempt from the equalization levy, that is, from scrap which has not undergone any change of ownership (using this term in a strictly legal sense) between its production and its utilization.

Furthermore, for the purpose of the equalization scheme, the concept of an undertaking may be identified with that of a natural or legal person.

It is established that the ferrous scrap in dispute was not produced by the applicant, which is a company entirely distinct from the Metalsider undertaking.

This being so, it must be regarded as bought scrap and as such subject to the equalization levy.

The applicant further maintains that the ferrous scrap in question should have been exempt from equalization on the ground that it constitutes stocks, within the meaning of Article 4 of general Decision No 2/57.

The effect of this Article is not to exempt scrap purchased and consumed by users from payment of the equalization contributions.

Its purpose is merely to avoid a second assessment being made at the moment they are put in the furnace of those quantities of ferrous scrap which are not used from day to day but are added to stock.

In this instance, the ferrous scrap in dispute was purchased and consumed by the applicant.

Moreover, the applicant described this scrap as stocks as at the first day of the month, without providing any evidence for this description.

The applicant contends finally that the exemption granted to undertakings in existence on the entry into force of the financial scheme as regards the consumption of ferrous scrap drawn from stocks available at that date should also have been granted to undertakings which, like the applicant, commenced their activities after the entry into force of this scheme, as regards the consumption of stocks available the first time the furnace was charged;

by subjecting the ferrous scrap in question to the equalization levy the High Authority infringed the principle of non-discrimination, to the detriment of the applicant.

Undertakings in existence before the entry into force of the financial scheme purchased ferrous scrap at the market price, which was unaffected by equalization, whereas those undertakings which purchased the same product after that date benefited from the effect of this scheme upon market prices.

The applicant has offered no specific evidence that the ferrous scrap in dispute was taken from stocks held by the Metalsider undertaking prior to the entry into force of the financial scheme.

In these circumstances, as the factual situations of the applicant undertaking and of other undertakings which have benefited from this exemption are not comparable, the complaint of discrimination must be dismissed.

For all these reasons the application must be regarded as unfounded.

Costs

Under the terms of Article 69 (2) of the Rules of Procedure, the unsuccessful party shall be ordered to pay the costs.

In this instance, the applicant has failed in its application.

It must therefore be ordered to bear the costs.

On those gounds, 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 the Treaty establishing the European Coal and Steel Community, especially Articles 33, 47 and 53; Having regard to the Protocol on the Statute of the Court of Justice annexed to the Treaty establishing 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 (2), THE COURT hereby:

1.o Dismisses Application 50/65 as unfounded;

2.o Orders the applicant to pay the costs.