JUDGMENT OF 16. 3. 1971 — CASE 70/69 FERAM v COMMISSION

In Case 70/69

THE COURT composed of: R. Lecourt, President, A. M. Donner (Rapporteur), and A. Trabucchi, Presidents of Chambers, R. Monaco, J. Mertens de Wilmars, P. Pescatore and H. Kutscher, Judges, Advocate-General: K. Roemer Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts and procedure

The facts on which the proceedings are based may be summarized as follows:

By Decision No 7/63 of 3 April 1963 (OJ No 54 of 6. 4. 1963) concerning the drawing up of statements of account relating to ferrous scrap and scrap treated as such, the High Authority of the ECSC provided for a regrouping of movements of funds in respect of the Brussels Fund (CPFI) and the Luxembourg Fund, and the provisional closure on 31 May 1963 of the accounts of each undertaking subject to the equalization scheme.

By an individual decision of 11 February 1965, adopted pursuant to Decision No 7/63, the contributions due from the Feram undertaking were fixed at lit 105889634 as at 31 May 1963 (calculated on the basis of 32805 metric tons of bought scrap). The application made by the Feram undertaking against that decision was dismissed as inadmissible (Joined Cases 25 and 26/65 [1967] ECR 33).

General Decision No 19/65 of the High Authority of 15 December 1965 (OJ No 224 of 30. 12. 1965), on the drawing up of final statements of account relating to the equalization of imported ferrous scrap and scrap treated as such, provides for the final fixing on the one hand of the rates of equalization contributions and on the other hand of the rates in respect of interest charges (Articles 4 and 2) and furthermore lays down in particular:

that the capital balance of each undertaking (constituted by its credits and its payments on the one hand and contributions due on the other hand) was to bear interest at 5 % from 31 May 1963 until the date on which payment is made and in no case later than 31 December 1965 (Article 5 (1));

that a complete statement of account drawn up as at 31 December 1965, and taking into consideration in respect of each accounting period all debits and credits of principal and if interest was to be sent to all undertakings concerned (Article 6);

that as from 1 January 1966, the credit or debit balance in accordance with this statement of account was to bear interest at 5 %, p.a. which was to be converted into capital (Article 5 (3));

that after 31 December 1965 receipts from actions for recovery of wrongfully charged equalization amounts and bad debts were to be divided among all the undertakings affiliated to the equalization scheme in proportion to the basis of their assessment to contribution.

The application of these rules to the Feram undertaking (still in respect of a quantity of scrap amounting to 32805 metric tons) shows, as at 31 December 1968, a supplementary amount of lit. 24189879, which had been charged to the Feram undertaking by a decision of the Commission of the EC of 9 October 1969, a decision which is the subject of the present application.

The application was lodged in the Court Registry on 29 November 1969.

The written procedure followed the normal course.

Because of the connexion between the present case and Case 67/69, the Court, by order of 8 July 1970, decided to join them for the purposes of the oral procedure.

On hearing the report of the Judge-Rapporteur and the views of the Advocate-General, the Court decided to open the oral procedure without a preparatory inquiry.

The parties presented oral argument at the hearing on 12 January 1971.

The Advocate-General delivered his opinion on 2 February 1971.

II — Conclusion of the parties

The applicant claims that the Court should: ‘interrogate the defendant on the following circumstances:

1) What is, at the present time, the exact tonnage of scrap, calculated year by year on which the equalization levy was wrongly charged from 1 April 1954 to 31 March 1959?

2) What was the exact amount of the expenses borne by the Community calculated year by year as from 1 January 1968, to carry out a check of the tonnages of scrap involved in fraud, for legal expenses, travelling expenses, etc., and what are those which were incurred normally from 1 April 1954 to 1 January 1958 to have a check made of the working of the Brussels organizations?

3) What is the exact amount today of the equalization sums improperly paid to those committing frauds and which the Community has succeeded in recovering?

4) What are the names of the persons responsible for the frauds and of their accomplices who have been the subject of proceedings and what are the tonnages and the amounts improperly paid?

5) Have employees and officials of the Joint Bureau of Ferrous Scrap Consumers (the “OCCF”) and the Imported Ferrous Scrap Equalization Fund (the “CPFI”) been the subject of proceedings? If so, who are guilty and who have been discharged?

6) What is the exact amount of imported ferrous scrap and scrap treated as such imported into France during the period from 1 April 1954 to 31 December 1956 in respect of which the customs documents had already been destroyed when the Community inspectors asked for them? What is the amount imported into Belgium during the same period?

7) What legal measures or administratíve sanctions were taken in respect of the employees of Campsider in Italy who had removed all documents capable of proving validly the origin of the scrap taken into account for equalization?

8) What is the present state of proceedings in the civil action which the High Authority stated it had brought against the Netherlands State in order to obtain compensation for damage caused to the Community by the issue of false documents by one of its officials?

9) Is it true that the Federal Trade Commission in the United States on 29 May 1961 (No 6516, Federal Judge John Lewis) concerning the action brought against “Luria Brothers and Company Corporation” stated the following: “It is clear that the agreements made between the OCCF and Luria Brothers and Company had the effect of limiting trade competition in the purchase of scrap made by the OCCF on the United States market. In view of the position of the Luria company in the American market and the size of the scrap purchasing schedule of the OCCF, the agreement made between these two parties clearly created a monopoly in favour of the Luria group in respect of the export of scrap by the United States … It is impossible not to see that the basic structure of such an agreement and its objective have remained what they actually were: anti-trust agreements.” ?

10) Order the defendant in accordance with Article 23 of the Protocol to produce to the Court all documents relative to the question at issue in the application, and in particular the copy of the quarterly reports sent to the High Authority by the Société Fiduciaire de Belgique on the subject of the inquiry made into the management of the OCCF and of the CPFI of Brussels, for the period from 1 April 1954 to 31 March 1959.

11) Declare the present application to be admissible.

12) Declare Decisions Nos 7/63 and 19/65 on which the contested individual decision is based to be irregular in form and illegal in substance and consequently annul the individual decision for the reasons set out in the present application, which will be expounded more fully in later pleadings and oral submissions.

13) Hold the defendant liable for the wrongful act or omission (Article 40) constituted by the fact that it notified Feram validly for the first time on 27 October 1969 of the amount of the interest and for having obliged it, thus causing it damage, to publish its own price list after an average delay of 14 years without knowing the amount of this unduly high payment and therefore without having been able to take account of it in drawing up its price list.

14) Calculate the damage suffered by the applicant, by reason of the complaints put forward in the preceding paragraph, to the extent of 15 % of the total sales of steel during the period when the compulsory scheme for the equalization of imported ferrous scrap or scrap treated as such was in force in the Community or, failing that, ask an expert to be appointed to establish the exact amount;

15) Hold the defendant responsible for the secret conclusion of an agreement with the Council of Ministers of the Community by which it undertook to commit a serious breach of the duty of supervision and checking which is imposed upon it by the law which governs the European Coal and Steel Community as well as by the normal diligence which any public administration should show, thus making easy the practice and perpetuation within the compulsory ferrous scrap equalization scheme of large-scale frauds involving a very large sum. … The applicant would be fully in agreement if the Court considered it appropriate to try to resolve the present case extra-judicially and amicably, which would be advantageous for both parties.

16) Order the defendant to pay the costs including the advocate's fees.’

The defendant contends that the Court should:

‘Reject all the claims made by the Acciaieria e Ferriera di Roma—Feram in its Application 70/69 of 29 November 1969 and order the applicant to pay the costs and expenses of the case.’

In its rejoinder the defendant further contends that the Court should:

‘Join the present case to Case 67/69, commenced by the Società Industriale metaiiurgica di Napoli (Simet)’.

III — Submissions and arguments of the parties

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

A— The application for annulment

The applicant asks for the annulment of the contested decision by pleading the illegality of General Decisions Nos 7/63 and 19/65.

In this respect it alleges in particular:

a) that these regulations produce discrimination by excluding from scrap equalization scrap from steel alloys and scrap intended for integrated foundries;

b) that the High Authority (Commission) disregarded the recommendations which the Council made when giving its assent to Decision No 14/55, including particularly:

‘…

3) To avoid increasing the cost price in the whole of the Community and in particular increasing the net burden borne in the working of the fund by certain regions of the Community, the equalization levies must not be increased without a very serious reason.

4) The effort made to assist imports and a reasonable price level must not encourage either in existing plant or by the creation of new plant, an ill-considered expansion in the consumption of scrap…’ (Third General Report on the activities of the Communities, p. 106);

c) that the amount of the equalization rates was decided in an incorrect manner, the average weighted costs of internal recovered scrap being priced at too low a level and those of imported scrap at too high a level;

d) that the High Authority (Commission) has always failed to justify the management of the Equalization Fund by a detailed account of the factors to be taken into account;

e) that under Article 53 (b) of the Treaty, the High Authority should have sought the assent of the Council to Decision No 19/65.

The defendant replies to these complaints:

a) that this argument has already been rejected by the Court in Case 18/62 [1963] ECR 259;

b) that even supposing that the recommendations put forward were mandatory, on the one hand the increase in contributions is due essentially to the imposition of interest charges resulting from Decision No 7/61, the legality of which the Court has accepted (Case 111/63, [1965] ECR 677), and on the other hand the increase in consumption of scrap is due only to the increase in production of steel during the years 1954 to 1958;

c) that in fixing the average weighted price of imported scrap, the High Authority based itself on the contracts of purchase laid down by the OCCF, and that as concerns internal recovered scrap, the Court in Case 30/65 ([1966] ECR 35) rejected the complaints made in that respect;

d) that within the limits imposed upon it by Article 47 of the Treaty the High Authority has given a full statement of the reasons for the decisions in question;

e) that Article 53 (b) of the Treaty applies only to decisions instituting financial arrangements.

B — The action for damages

In order to support this request the applicant bases its action on two complaints:

1) It states that by taxing highly transactions carried out fifteen years previously—which makes it impossible to recover such taxation in sales prices—the Commission has committed a wrongful act or omission in regard to the applicant. The defendant alleges that a similar complaint was rejected by the Court in Case 20/60 (Rec. 1961, p. 319 et seq.). In fact the delay with which the final detailed account was communicated to the applicant is only the inescapable consequence of a system necessarily implying a posteriori calculations and consequently cannot amount to a wrongful act or omission. If the applicant at the time of the fixing of sales prices for the period 1954 to 1958 was not able to take account of the exact cost of equalization, this was a normal inconvenience of the system, which cannot be classified as damage capable of being attributed to the Community.

2) Furthermore the applicant considers that the behaviour of the defendant in respect of the frauds committed in respect of scrap equalization, amounts to an unlawful act or omission in regard to the applicant.

(a) Admissibility

According to the defendant this head of the application is inadmissible because, on the one hand, it is not stated what are the irregularities constituting the unlawful acts or omissions of the Community, so that the requirements of Article 22 of the Protocol on the Statute of the Court and Article 38(1) of the Rules of Procedure are not satisfied and because, on the other hand, the action is premature, since the amount of the possible damage flowing from the said frauds depends essentially on the result of actions for recovery currently pending.

The applicant did not express its views on the admissibility of its request.

(b) On the substance of the case

Relying in particular on the opinions of the Advocates-General of the Court in Case 33/59 [1962] ECR 381), on the one hand, and in the Joined Cases 9 and 25/64 ([1965] ECR 311), on the other hand, the applicant states that the High Authority has failed in its duties of supervision in respect of equalization of scrap and that consequently the frauds which took place may be imputed to a wrongful act or omission of the Community. These frauds contributed to increasing the rates of contribution imposed on the undertakings subject to the equalization scheme so that they directly caused damage to these undertakings, including the applicant. As to the exact evaluation of the damage, the applicant considers that it can be made on the basis of the facts which are at the disposal of the Commission and the production of which it asks the Court to order.

The defendant denies the existence of a wrongful act or omission on its part alleging in particular:

that the ‘Brussels organizations’ (the OCCF and CPFI), which carried out the management of the scrap equalization scheme during the period when the frauds were committed, were not part of the High Authority, but were entirely distinct from the latter and were furthermore governed by private law (cf. Judgment of the Court in Case 9/56, Rec. 1958, p. 42);

that consequently a wrongful act or omission can originate only in the supervision of the management of the scheme, which devolved on the High Authority;

that in respect of the supervision of activities governed by private law by public authorities, Community law provides no rules, so that it may be useful to consider the solutions reached by the national laws of the Member States;

whilst Italian law excludes any responsibility by the administration in this respect, French law accepts it only in case of ‘gross malfeasance’.

that since when it became aware of the frauds, the High Authority took action, first with care then with increasing energy, its behaviour certainly cannot be classified as gross malfeasance.

that even supposing the management of the equalization scheme devolved directly upon the High Authority, its responsibility can be raised only in case of ‘gross malfeasance’ —a solution also accepted by French case-law (cf. Opinion of Mr Advocate-General Lagrange in Case 23/59, Rec. 1958-1959, pp. 525 and 526).

Furthermore the applicant cannot claim to have suffered actual and existing damage when, on the one hand, it has still not paid the whole of its contributions and, on the other hand, the damage itself is only future and uncertain, since actions for recovery are still pending.

Grounds of judgment

1. By an application of 27 November 1969, lodged at the Court Registry on 29 November 1969, the Feram undertaking of Rome brought before the Court: (a) an application for the annulment under the combined provisions of Articles 33 and 36 of the Treaty establishing the European Coal and Steel Community of the decision of the Commission of the European Communities of 9 October 1969, taken in implementation of the provisions concerning the equalization of imported ferrous scrap and scrap treated as such and requiring the Feram company to make supplementary equalization payments; and (b) an action for damages under Article 40 of the same Treaty against the European Coal and Steel Community.

The application for annulment

2. The applicant requests the annulment of the contested decision on the ground that General Decisions Nos 7/63 and 19/65, of which the contested decision constitutes the application, are illegal in several respects.

3. A — These decisions are said to be discriminatory to the extent to which they exclude from the obligation to pay contributions and from the right to receive equalization payments, the tonnages of purchased alloy steel scrap and, in the case of undertakings having a steel foundry, the proportion of bought scrap consumed corresponding to the proportion of production of crude steel for castings.

4. The defendant has argued that the exemption of alloy steel scrap is justified by the difference between the alloy scrap market and that of ordinary scrap, the price of alloy scrap depending rather on the proportion of noble metals found in it than on that of ferrous scrap. The inclusion of alloy scrap in the equalization scheme had, according to the defendant, an undoubted influence on the market in non-ferrous metals which do not fall within the ECSC Treaty. The defendant has given as a reason for the exclusion of scrap intended for integrated foundries, the necessity not to change the normal conditions of competition between them and the independent foundries.

5. These explanations, which are not disputed by the applicant, in substance appear acceptable. The High Authority, by adopting General Decisions Nos 7/63 and 19/65 which furthermore only re-enacted previous provisions, was entitled to take the view that a proper application of the principles of the Treaty required the exclusion of the said scrap from the equalization scheme and that there is nothing to show that in doing this it distorted the scheme and made it discriminatory.

6. Consequently the complaint must be rejected.

7. B — Further, according to the applicant the competent authorities disregarded the recommendations which the Council of the ECSC made when giving its assent to Decision No 14/55 of the High Authority of 26 March 1955 establishing financial machinery designed to ensure a regular flow of scrap for the Common Market (OJ No. 8 of 30.3.1955, p. 685).

8. Recommendations drawn up by the Council upon the giving of an assent such as that prescribed in Articles 28 and 53 of the Treaty cannot have the effect of restricting or modifying the express powers conferred by the decision which is the subject of that assent. The legality of decisions taken in implementation of a general decision which has been the subject of an assent can therefore be examined only on the basis of the actual provisions of that general decision.

9. Consequently even if it were established, which the defendant denies, that in exercise of the powers conferred by Decision No 14/55 the competent authorities disregarded the recommendations of the Council, this would have consequences only as regards the relations between those authorities and the Council, but could not invalidate decisions taken in conformity with the provision in respect of which the assent was given. Furthermore, Decision No 14/55 was supplemented and amended by several later decisions which also obtained the requisite assent of the Council, particularly Decision No 16/58 of the High Authority of 24 July 1958 (OJ No. 10 of 30.7.1958, p. 275), by which the scheme was renewed. There is nothing to indicate that on these occasions the Council found that its initial recommendations had been disregarded.

10. The complaint must therefore be rejected.

11. C — The applicant goes on to allege that the data used as the basis of the average weighted equalization prices fixed by Decisions Nos 7/63 and 19/65 are correct. It says that the average weighted costs of internal recovered scrap were excessively reduced whilst the average costs of imported scrap were increased so that the equalization rate was raised to an unnecessarily high level. According to the experience of the applicant itself the prices of internal recovered scrap were consistently higher than the average prices adopted by Decisions Nos 7/63 and 19/65.

12. The defendant replies that the basic data for fixing average prices of imported scrap were taken directly from contracts of purchase made by the Joint Bureau of Ferrous Scrap Consumers, the only body competent to make purchases of scrap on the international market on behalf of undertakings which requested it to do so and that this fixing of prices consequently cannot attract any criticism. As regards the average prices of scrap bought within the market, the necessary data were derived from the monthly declarations of the undertakings containing information concerning the prices paid. These declarations were strictly supervised by the checking of purchase invoices. The defendant further states that it is in the nature of the scrap market to cause, particularly on the basis of the location of consuming undertakings, price differences which are in themselves compatible with the unity of the market.

13. The applicant has submitted nothing capable of constituting even the beginnings of proof of its allegations. In particular it has failed to prove that the price differences in the market were changed through the functioning of the equalization scheme or that the functioning of the scheme aggravated the disadvantages which it suffered in comparison with better situated undertakings.

14. The complaint must therefore be rejected.

15. D — The applicant lastly alleges that the reasons for Decisions Nos 7/63 and 19/65 are inadequately stated. In its reply it stated that by this complaint it did not intend to require that the documents justifying the various figures laid down by these decisions should be annexed to the decisions or published, but asks that the defendant should submit the books of account relating to the equalization scheme to an official auditor of accounts or to a committee of representatives of undertakings and that the defendant should publish the resulting report.

16. The reasons for the provisions of Decisions Nos 7/63 and 19/65 are given in both the preambles and annexes to those decisions. The requirement of a final check of the accounting of the equalization scheme is concerned not with the supervision of the legality of the decisions in question but with the efficiency of the working of this scheme which is a matter for other institutions and authorities of the Communities and particularly the Parliament and the auditor.

17. Further, the defendant has stated that all the figures set out in the annexes to Decisions Nos 7/63 and 19/65 were submitted by its officers to repeated examinations and checks and that the auditor of the ECSC always exercised his supervision over the management and the annual accounts of the equalization scheme.

18. The complaint must consequently be rejected.

19. E — The applicant further regards Decisions Nos 7/63 and 19/65 as illegal because they were not submitted to the Council and did not receive its assent as required by Article 53 of the Treaty.

20. However, that article requires the unanimous assent of the Council only for decisions by which the High Authority institutes financial arrangements. The contested decisions amount only to measures implementing Decisions No 18/58 which itself was given the requisite assent of the Council.

21. It follows that the objection of illegality raised against Decisions Nos 7/63 and 19/65 must be dismissed. Consequently the principal application for annulment must also be dismissed.

The application for damages

22. In its originating application the applicant asks the Court to hold the defendant liable for wrongful acts or omissions within the meaning of Article 40 of the Treaty. A first unlawful act or omission is said to be constituted by the fact that on the one hand the Commission validly notified it for the first time on 18 October 1969 of the amount of its equalization contributions, whilst on the other hand, the applicant was obliged to publish its price lists for the period subject to equalization (April 1954 to November 1958) without knowing the amount of those contributions. The damage suffered by the applicant under this head amounts to 15 % of its total sales of steel during the contribution period.

23. A second wrongful act or omission is said to be constituted by the fact that because of its commitments to the Council, the High Authority was seriously in breach of the duty of supervision which is imposed upon it by the Treaty and grossly failed to exercise the normal diligence which any public administration must show, thus facilitating the perpetration of large-scale frauds within the framework of the equalization scheme. In its conclusions the applicant stated lastly that it would accept any solution capable of fixing the amount of damage which it had suffered.

24. As concerns the first head of the claim, the very nature of any equalization scheme which could legally have been established by the general decisions of the High Authority necessarily implied a posteriori calculations. In fact the equalization rate could be fixed only following consideration of a series of factors such, in particular, as the prices and the respective total quantities of imported scrap and of scrap purchased within the market.

25. In order to ascertain these factors the competent authorities depended particularly on the care with which the undertakings concerned carried out their duty to make the necessary declarations. It is common knowledge and furthermore proved by this very case that certain undertakings have not always shown all the care required. The applicant has not however alleged that the administration was guilty of negligence by failing to use the requisite vigour in reminding those subject to its administration of their duties.

26. In fact the disadvantages complained of were inevitable and inherent in the equalization scheme. Such disadvantages cannot amount to damage giving rise to a right to compensation especially as they affect all iron and steel undertakings in the Community and equalization has on the other hand brought considerable benefits to users of scrap as a whole.

27. In the present case it has not been established that the disadvantage suffered by the applicant exceeded that normally inherent in the chosen scheme or those suffered by its competitors. It cannot be disputed, furthermore, that while the scheme was functioning the applicant was regularly informed of the amount of its contributions as appeared on the one hand from provisional calculations by the administration and on the other hand from declarations made by itself regarding its purchases of scrap. In December 1965 at the latest it received its virtually definitive statement of account which was, of course, subject to its obligation to pay interest which was legally due from it.

28. Since neither the existence of a wrongful act or omission nor of damage special to the applicant has been established, the first head of the action for damages must be dismissed.

29. As regards the second head of the action it appears from the originating application that by the commitments which it mentions the applicant has in mind the recommendation of the Council, formulated at the time of the assent to Decision No 14/55 mentioned above, that the High Authority should limit very strictly the actions taken in respect of supervision exercised over the measures adopted by the Brussels organizations and their national offices. Acting in accordance with that recommendation the High Authority is stated to have failed in its duty to ensure the achievement of the objectives both of the Treaty and of the financial arrangement.

30. The possible existence of the alleged commitments is in any event irrelevant in the present case, since the responsibility of the Community authorities must be considered in the light of the established rules and the valid principles applying to the matter. The High Authority, furthermore, has never sought to exonerate itself by relying on such recommendations of the Council, nor could it do so.

31. The applicant based its complaints of lack of supervision and of care on nothing more than the fact that very serious frauds took place in the management of the equalization scheme.

32. The defendant considers the claim to be inadmissible on the ground that it is not possible to see exactly which facts the applicant intends to rely upon, as the basis of its right to compensation.

33. The mere fact that frauds took place does not by itself prove that the administration failed in its duties of supervision and consequently was guilty of a wrongful act or omission. The Commission has stated that the tonnages of scrap wrongfully accepted for equalization amount to approximately 2 % of the total tonnage accepted and that the frauds complained of, although they amounted to a serious handicap, were not of such a character as to distort the equalization scheme or throw it out of balance. It has stated also that at present four-fifths of the wrongly paid sums have been recovered and that as to the rest, proceedings for recovery are still pending.

34. Having regard to these observations, which were not disputed during the proceedings, the complaints put forward must be supported by much more precise particulars than the general assertions to which the applicant has confined itself, in order to be taken into consideration as proof of the existence of a wrongful act or omission. This head of the action for damages must consequently also be rejected.

Costs

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

The applicant has failed in its submissions.

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 the Treaty establishing the European Coal and Steel Community, especially Articles 33, 36, 40 and 53; 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, THE COURT hereby:

1 Dismisses the application;

2 Orders the applicant to bear the costs.