JUDGMENT OF 11. 5. 1983 — CASE 244/81 KLÖCKNERWERKE v COMMISSION

In Case 244/81

THE COURT (Fourth Chamber) composed of: A. O'Keeffe, President of Chamber, P. Pescatore, G. Bosco, T. Koopmans and K. Bahlmann, Judges, Advocate General: G. Reischl Registrar: H. A. Rühi, Principal Administrator

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the course of the procedure and the conclusions, submissions and arguments of the parties may be summarized as follows :

I — Facts

Taking the view that the European steel industry was facing a manifest crisis within the meaning of Article 58 of the ECSC Treaty and that the means of indirect action at its disposal had proved ineffective or insufficient to deal with it, the Commission adopted, for the purposes of reestablishing the balance between supply and demand, Decision 2794/80 of 31 October 1980 (Official Journal L 291, p. 1) establishing a system of steel production quotas for undertakings in the Community's iron and steel industry until 30 June 1981.

Nevertheless, demand for the main types of steel product continued to decline and the slight increase in prices proved insufficient, in view of the financial burdens borne by the undertakings; it thus became clear towards the middle of 1981 that the European iron and steel industry was still facing a period of manifest crisis and that the attainment of the objectives under Article 3 of the ECSC Treaty was being seriously jeopardized.

Therefore, by Decision 1831/81 of 24 June 1981 (Official Journal L 180, p. 1), the Commission set up a monitoring system and a new system of production quotas for the undertakings in the iron and steel industry, in respect of certain products.

Under Article 1 of Decision 1831/81 the monitoring system for production and deliveries which the decision introduces applies to hot-rolled wide and narrow strips (Category I), as well as to certain products derived therefrom, namely reversing mill plate and wide flats (Category II), heavy sections (Category III), wide rod (Category IV), reinforcing bars (Category V) and merchant bars (Category VI).

Article 4 establishes a new system of production quotas in respect of derived products of Category I, that is to say, for the following products:

Category I a

Hot-rolled wide strip for direct use and export;

Hot-rolled wide strip for re-rolling or other conversion processes in other Community undertakings;

Plate with a thickness of 3 millimetres or more, obtained by cutting hot-rolled wide strip;

Hot-rolled strip less than 600 millimetres wide, including tube-strip;

Cold-rolled plate of 3 millimetres and over (cut or coiled);

Category I b

Cold-reduced sheet cut or coiled, with a thickness of less than 3 millimetres;

Cold- or hot-rolled sheet for the production of derived products in Categories I c and I d in other Community undertakings;

Category I c

Hot-dipped galvanized sheet, cut or coiled;

Galvanized sheet for the production of Category I d products in other Community undertakings;

Category I d

Other coated flat products.

Article 5 of the decision provides that the Commission is to fix each quarter for each undertaking its production quota and the part of such quotas which may be delivered in the common market, on the basis of the reference production and reference quantities of the undertaking in question, and by application of certain abatement rates to such production and quantities.

The reference production of derived products in Categories la, Ib, I c and I d for undertakings producing hot-rolled wide and narrow strip are, under Article 6 of Decision 1831/81, to be calculated on the basis of the reference production for Category I.

The reference production for Categoiy I is, in turn, calculated by finding the arithmetical mean of two figures:

a) The first figure is the arithmetical mean of production in three periods: However, if production for 1974 is less than that of the 12 best months referred to in the second indent above, that figure is to be replaced by the latter. The same is to be done in regard to the production for the period from July 1979 to June 1980 if, during the period, an undertaking has suffered more than 30 consecutive days of strikes.

The year 1974;

The 12 calendar months of the period from July 1977 to June 1980 during which production of the four groups of rolled products I to IV, as defined in Article 2 of Decision 2794/80 [namely hot-rolled wide and narrow strips, reversing mill plate and wide flats, heavy sections (sheet piling, side-flanged beams, other beams and other sections, permanent-way material) ; light sections (coiled wire rod, concretereinforcing bars and other merchant bars)] was the highest; the 12 calendar months thus chosen need not be consecutive;

The period of 12 months from July 1979 to June 1980.

b) The second figure gives an annual reference resulting from the production quotas granted under Decision 2794/80 during the fourth quarter of 1980 and the first quarter of 1981. The second figure is to be calculated as follows: Reference production for Categories I a, I b, I c and I d is to be calculated as follows : The production of each of those categories for the period of the 12 best months is to be converted into coil weight by the application of conversion coefficients of 1.000 for Category Ia, 1.110 for Category I b, 1.033 for Category I c and 1.075 for Category I d. Division of those results by the production of hot-rolled wide and narrow strip in the same 12 best months yields coefficients which are to be used to derive from the reference production established for the products of Category I the reference production for the derived products expressed in coil weight. Such reference production is then to be expressed as weights of derived products by application of the conversion coefficient.

The quotas granted by the Commission for the fourth quarter of 1980 and the first quarter of 1981, including all adjustments granted and the products referred to in Article 6 (19) of Decision 2794/80, are to be taken into consideration:

These quotas are to be employed to reconstitute the relevant reference production by invoking the abatement rates in force during the quarters in question;

The ratios between the reconstituted reference production and the reference production established in pursuance to Article 4 (1) of the abovementioned decision are to constitute the correction factors;

The average of these correction factors is to be applied to the reference production calculated in accordance with the abovementioned Article 4 (1) in respect of the second and third quarter of 1981 to establish the corrected reference production for those quarters;

The sum total of the reconstituted reference production for the fourth quarter of 1980 and the first quarter of 1981 and the corrected reference production for the second and third quarter of 1981 is to constitute the corrected annual production;

Such corrected annual reference production is to be further corrected for the products exempted by the decision by deducting a proportion equal to that which those products represented in the reference production for the 12 best months.

In the case of undertakings producing solely derived products, Article 7 provides that the production of the 12 best months is to be taken as the reference production for the products of Categories la, Ib, I c and I d. Such production is to be adjusted to take account of the reference production for derived products established in respect of undertakings producing hot-rolled wide and narrow strip. The adjustment is to be carried out in such a way that the reference production corresponds to the share of the total Community production in each category of derived products which those undertakings had during the period of the 12 best months.

The 12 best months are to be chosen by a review of the production of the derived products as a whole during the period from July 1977 to June 1980.

Article 8 provides that the reference quantities which are used to establish the proportion of the quotas which may be delivered on the common market by each undertaking shall be calculated by the application to its reference production of the percentage of its deliveries on the common market compared with its total production during the period of the 12 best months.

Under Article 9(1) the Commission is to fix, each quarter, the abatement rates for establishing the production quotas and the part of those quotas which may be delivered on the common market.

Under Article 9 (2) the Commission is to notify to each undertaking its reference production and reference quantities as well as its production quotas and the part of those quotas which may be delivered on the common market.

Article 11(1) provides that a tolerance of 3% in excess is to be allowed on each production quota, it being understood that production in Categories I a, I b, I c and I d as a whole may not exceed the sum of the quotas assigned to each of those categories of products.

Article 11 further provides, in paragraph (5), that deliveries in respect of which an undertaking does not show proof of export outside the territory of the Community are to be deemed to have been made within the common market.

Article 12 fixes the fine to be imposed on any undertaking exceeding its production quotas or part of such quotas which may be delivered on the common market.

Decision 1831/81 was amended by Commission Decision 1832/81 of 3 July 1981 so as to include reinforcing bars and merchant bars within the new system of production quotas (Official Journal L 184, p. 1). An amendment was thereby made to Article 13 which provides for an adjustment of the reference production figures of an undertaking which, as the result of a properly-declared investment programme on which the Commission has not delivered a negative opinion or which was not subject to the obligation to declare it but for which the Commission considers that it would not have entailed delivering such an opinion, brings new rolling mills or new conversion lines into operation; similarly, Article 14 was replaced by a new provision under which the Commission makes an appropriate adjustment to the reference production of any undertaking which is caused exceptional difficulties by the quota system on account of the scale of the abatement rates imposed for any given quarter.

In pursuance of Article 9 (1) of Decision 1831/81, the Commission adopted Decision 1833/81 of 3 July 1981 (Official Journal L 184, p. 6) fixing the abatement rates for the third quarter of 1981.

The abatement rates for the derived products of Category I were as follows :

In application of Articles 5 and 9 (2) of Decision 1831/81, the Commission, in a letter to 28 July 1981, notified Klöckner-Werke AG, whose registered office is in Duisburg, of its reference production figures and reference quantities for the third quarter of 1981, together with its production quotas and that part thereof which might be delivered in the Common Market. The figures thus fixed were as follows:

In the light of observations submitted to it by Klöckner-Werke, first by telex message on 7 August 1981 and subsequently in the course of discussions with its officers, the Commission sent a letter dated 31 August, in which it revised its notification of 28 July 1981 by bringing the annual reference production in Category I a up from 934491 to 965464 tonnes, the quarterly reference production figure up from 233623 to 241366 tonnes, and the production quota for the third quarter from 170545 to 176197 tonnes.

II — Written procedure

Pursuant to Articles 33 and 36 of the ECSC Treaty, Klöckner-Werke AG brought an action on 8 September 1981, whereby it sought to have the Commission's communications of 28 July and 31 August 1981 declared void.

The written proceedings followed the normal course.

In reply to an inquiry of 8 July 1982, the applicant informed the Court on 27 July that, owing to its special circumstances of fact and of law, it wished to pursue its application despite the Court's verdict of 7 July 1982 in Case 119/81 between the same parties.

In reply to an inquiry of 17 August 1982, the applicant pointed out to the Court on 9 September 1982 the special features distinguishing its application from Case 119/81 and the reasons justifying it in pursuing the reasoning and arguments adduced in support.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General the Court decided to open the oral procedure without any preparatory inquiry. The parties were none the less requested to explain at the hearing some of the points made.

By order of 13 October 1982 pursuant to Article 95 (1) and (2) of the Rules of Procedure, the Court decided to assign the case to the Fourth Chamber.

III — Conclusions of the parties

Having partially amended its conclusions in its reply, the applicant claims that the Court should:

Declare the defendant's decisions of 28 July and of 31 August 1981 null and void.

In the alternative:

a) declare the production quotas laid down by the contested decisions void in so far as they fall short of the following quantities: For Category I a 286000 tonnes; For Category I b 340000 tonnes;

b) declare the production quota for Category I a void in so far as it covers cold-rolled plate of 3 millimetres and over;

c) declare the production quotas void in so far as it may be shown that poduction is intended for nonmember countries;

d) declare the contested decisions void, in so far as they determine the part of the production quotas which may be delivered in the common market;

Order the defendant to pay the costs.

The Commission contends that the Court should:

a) dismiss the application;

b) order the applicant to pay the costs.

IV — Submissions and arguments of the parties

A — Main claim

The applicant supports its main claim by a number of submissions and arguments, directed both against general Decision 1831/81 as amended by Decision 1832/81 and against the individual decisions of 28 July and 31 August 1981, which allegedly demonstrate the unlawful nature of the general decision.

The Commission rejects all such submissions and arguments.

Principle of minimum utilization of capacity

The applicant alleges that the last sentence of the first subparagraph, and the second subparagraph, of Article 58 (2) of the ECSC Treaty show that a system of production quotas must enable employment to be maintained as far as possible. The threat to employment increases, it argues, in inverse proportion to the utilization of capacity; the quota system should therefore, if need be, provide for quotas to be raised to a level of minimum utilization of productive capacity corresponding to the average within the Community.

a) Production quotas allotted to the applicant on the basis of Decision 2794/8Ö were, it alleges, discriminatory and hence unlawful because they were so low, and Decision 1831/81 considerably aggravates its situation: under Decision 2794/80, the average utilization rate of hot-rolled wide strip mills within the Community stood at 52%, that of the applicant at 39%, whereas, under Decision 1831/81, the average utilization rate was 48% but that of the applicant 29.6%. The disparity between the applicant's utilization of its hot-rolling mills and the average utilization of mills within the Community therefore increased from 13 to 18 percentage points. The reason for that was that the method of determining reference production laid down by Decision 1831/81 halves the — already inadequate — increase in the applicant's reference production under Decision 2794/80. Under Article 6 (1) of Decision 1831/81 reference production is the arithmetical mean between the reference production calculated in accordance with Decision 2794/80 and actual output during certain periods in the past, without any increase comparable to the one provided for by Article 4 (3) of Decision 2794/80. Whereas the Commission reduced the average utilization of Community rolling-mills by four percentage points, it also reduced by 9.4 points the utilization rate — which was previously extremely poor in any case — of the applicant's Bremen No II hot-rolled wide strip mill, instead of bringing it into line with the Community average. By so doing, the Commission, the applicant claims, exceeded its margin of discretion, misused its powers, and infringed the Treaty.

b) The Commission wrongly supposes that the utilization rate of the applicant's rolling-mill in Bremen stands at 50.6% of capacity, whereas in fact the productive potential is being exploited only to the extent of 39% of actual capacity. The Commission assumes maximum productive capacity to be no more than 355000 tonnes per month, whilst the mill's potential actually amounts to 459000 tonnes. That is the figure disclosed by the Technical Audit Report, drawn up jointly on 1 May 1981 by the Belgian Centre des Recherches Métallurgiques [Centre for Metallurgical Research] and the Japanese Kawasaki Steel Corporation. By way of affording further evidence, the Court might order the running of the mill at maximum capacity over six weeks, under expert supervision. The lower figures adopted by the Commission are based on statements made by the applicant for statistical purposes; but such statements were merely a routine matter, without any practical interest for the undertaking, and it could not have been anticipated that they might one day acquire importance in the context of production quotas. The capacity of its rolling-mill in Bremen as stated by the applicant was in fact lower than its true productive potential. Just as the Commission would have to reduce an overstated capacity to its true level, it would likewise have to raise an understated capacity to its correct level. A possible infringement of Article 14 of Decision 22/66 of the High Authority of the ECSC of 16 November 1966 on information to be furnished by undertakings about their investments (Official Journal, English Special Edition 1965-1966, p. 280) might, where appropriate, warrant imposing a fine, but not holding the applicant to too low a level of capacity, thus causing it a loss of DM 264 million per annum. Such an attitude constitutes a flagrant infringement of the principle of proportionality, recognized by Community law.

c) Furthermore, the Commission has taken no account of the productive potential of the Bremen No I rolling-mill. The latter was more or less taken out of commission in 1974, as part of the restructuring measures promoted by the Commission. Its output potential amounts to 169000 tonnes per month; the applicant's productive capacity is increased by that amount, thus causing a further proportional drop in its utilization rate. The capacity of the mill must be brought into the reckoning, especially as the capacity of other undertakings which continue to be fully utilized are, according to the applicant, still included in their entirety for the purpose of calculating the quotas.

d) The utilization of the applicant's mill at 29.6% of capacity when the other mills in the Community are utilized at approximately 48%, and the consequent losses of DM 264 million per annum represent an infringement of the ECSC Treaty, in particular Articles 2 to 5, 8 and 58 thereof, and constitute a misuse of powers. The second subparagraph of Article 58 (2) of the ECSC Treaty places the Commission under an obligation, in particular “to maintain employment ... as far as possible”. That objective is attainable only by a proper utilization of productive capacity; a lesser utilization of an undertaking's capacity involves lower returns, which has repercussions on the maintenance of employment. If the economic situation calls for sacrifices in the matter of employment, such sacrifices should be distributed fairly. In order to maintain employment on a fair basis, it is necessary first and foremost to avoid any abnormally low utilization of capacity; the Commission must not cling blindly to the actual output levels of the past. In order to accomplish its mission the Commission should use the quota system to set up a minimum utilization rate, based on current — not past — capacity. Such minimum utilization may be neither higher nor lower than the average. The applicant's plant should be run at least at the average rate indicated by utilization as calculated from the reference production figures under Decision 1831/81. Article 58 of the ECSC Treaty requires the Commission not to accept the market situation but to correct it. By regarding itself as tied, on principle, to the current rate of capacity utilization, rather than exercising its discretion in seeking a minimum utilization — by which is meant an average utilization — to reach the goal set by Article 58 of the ECSC Treaty, namely to maintain employment, the Commission is misusing its powers. According to the applicant, the Commission is wrong in taking the view that a production-quota system under Article 58 must necessarily be linked to production. No doubt the total output of the ECSC must be reduced to a point at which — leaving exports aside — it ceases to outstrip domestic demand, as far as possible; for that purpose, however, it would have been possible to fix the volume of permitted output for each undertaking by setting a certain minimum percentage for the utilization of its capacity, rather than deducting a given percentage from actual output in the past, even in cases where utilization was already abnormally low. The Treaty does not positively dictate either method of calculation, but merely contains provisions relating to the result to be achieved, namely the fair maintenance of employment. It is precisely in terms of the degree to which capacity is utilized that the threat to employment must be perceived.

e) Decision 1831/81 contains no specific reason such as might justify the aggravation of the applicant's situation; it is vitiated by a flagrant infringement of an essential procedural requirement, in the form of a total absence of stated reasons.

The Commission takes the view that Article 58 (2) of the ECSC Treaty entails no obligation to guarantee a uniform utilization rate of productive capacity; it entails only the obligation to maintain employment as far as possible. When demand declines in a period of crisis, it is not feasible to maintain all the existing posts; in such a situation the obligation to maintain employment is confined to the task of ensuring that the sacrifices resulting from a decline in demand due to a period of crisis are distributed as evenly as possible amongst the various undertakings. Such an objective, however, must on no account be pursued by the granting of an uniform rate of utilization.

a) The rate at which an undertaking operates is the result of its standing in the market, which in turn is determined by many factors unrelated to the policy adopted by the Commission. When dealing with a crisis such as the one precipitated by the establishment of a system of production quotas, the Commission has no choice but to consider the operating level as an established fact. When demand declines owing to a period of crisis it can only attempt to prevent the operating level of certain undertakings from falling off disproportionately by comparison with that of other undertakings. The crisis-management provisions of Article 58 of the ECSC Treaty do not authorize the Commission to restructure production, but simply to adapt it to the decline in demand. The Commission's duty is to ensure that such adaptation is equitable, that is to say, that it operates as uniformly as possible for all undertakings.

b) Raising the rate of utilization of output capacity is not permissible except in strictly limited cases and in special circumstances warranting a departure from the rule that reductions in production must be distributed evenly on the basis of the status quo of undertakings' actual production. Thus, in the context of Decision 2794/80, the applicant itself benefited from an exceptional increase in its reference production, which is also having repercussions in connection with the new quota system under Decision 1831/81. In its management of the quota system, the Commission by no means adheres “blindly” to actual production in the past, however low the utilization rate may have been in this case.

c) The relationship established by the applicant between the level at which output capacity is utilized and the degree to which employment is put at risk cannot be accepted. Where the rate of utilization is lower, the degree of risk to employment is no greater unless the number of posts has not been adjusted to such lower rate. Regrettable as it may be, a reduction in demand and consequent reduction in output inevitably entail redundancies; Article 58 (2) of the ECSC Treaty also takes account of that fact of life. The applicant's view that the quota system set up by Decision 1831/81 is inconsistent with Article 58 (2) of the ECSC Treaty is therefore indefensible from the outset, at the legal level. Since the provision in question does not involve an obligation, in the context of the establishment of the quota system, to achieve an identical level of utilization rates within the Community by means of a restructuring of capacities imposed from above or by general measures, it follows that the assertion that the capacity of the applicant's No II hot-rolling mill for wide strip was greater than the Commission had supposed is quite irrelevant in the circumstances.

d) The arguments put forward by the applicant on the basis of a comparison of the utilization rate of its No II mill with the average utilization rate of hot-rolled wide strip mills within the Community cannot be accepted, by reason of the actual legal principles on which they are founded. The prohibition of discrimination which underlies the establishment of the quota system by no means entails adapting to the Community average a capacity utilization rate which deviates therefrom. Such an obligation to reorganize production quantities cannot be inferred from Article 4 (b) of the ECSC Treaty, if only because that provision, when seen in the light of the factual circumstances, limits itself to forbidding any negative discrimination, without postulating any positive discrimination. Moreover, at the level of factual considerations, it should be observed that the productive capacity of the applicant's No II wide-strip hot-rolling mill is no higher than 355000 tonnes per month; the applicant mistakenly bases its calculation of the utilization rate on the hypothesis of a monthly capacity of 459000 tonnes. If calculated in terms of actual capacity, the utilization rate of the applicant's mill does not deviate appreciably from the average within the Community. The applicant is subjected to a smaller reduction in its rate of operation than the average among Community undertakings: whereas the average reduction in capacity is 19.6%, the reduction borne by the applicant is only 7.3%. Even supposing that the No II mill had a capacity of 459000 tonnes per month, the applicant is suffering no discrimination: had that been the case, its operating rate for the years 1977 to 1979 would have been 37% instead of 50.4%; since its operating rate for the third quarter of 1981 amounted to 29.6%, the reduction in capacity suffered by the applicant was no more than 7.4%, whereas the average reduction in capacity within the Community was 19.6%. The deviation between the average utilization rate and that of the applicant, as cited in evidence by the latter, does not, in the Commission's view, point to an infringement of the prohibition of discrimination. The comparison does not relate to the same periods but merely emphasizes the privileged position enjoyed by the applicant under the system created by Decision 2794/80. As far as utilization levels are concerned, the applicant has moved considerably closer to the Community average.

e) Any system of production quotas set up by virtue of Article 58 of the ECSC Treaty necessarily has to be tied to production: the size of the reduction in production contemplated by that provision cannot be determined unless the quotas are fixed on the basis of actual output, whereas productive capacity does not enable an assessment to be made of the degree to which output has been adjusted to match the decline in demand, and the operating rate is merely a ratio expressing the relationship between production and productive capacity. The quota system under Article 58, however, has to be devised so as to enable production quantities to be fixed in absolute terms. The calculation of production quotas in terms of actual production during the reference period, considered as a normal reference-production figure, allows the quota system to rest upon an “equitable basis” as required by Article 58 of the ECSC Treaty. Any raising of the operating rate of undertakings having a lower average rate than the average at Community level would be at the expense of the other undertakings. Any quota system providing for such an increase to be generally applied, that is, to. all undertakings the operating rate of which is lower than average, would not afford an “equitable basis” but would discriminate against other undertakings.

f) The expert reports submitted by the applicant are either based on a different concept of capacity from the one used by the Commission, or else constitute a forecast for the future; the Commission contends that they afford no proof.

g) The quota system as established under Decision 1831/81 too rests on an “equitable basis” and keeps within the limits of the discretion conferred by Article 58 of the ECSC Treaty on the Commission for the purpose of constructing such a system. Furthermore, the applicant fails to adduce, in support of its submission of a misuse of powers, any argument other than those relied on in support of its submission of an infringement of the Treaty. The objection that a misuse of powers has occurred cannot therefore be upheld.

h) The applicant fails to appreciate the duty to state reasons which falls upon the Commission by virtue of Article 15 of the ECSC Treaty. In Section 4 of the recitals in the preamble to Decision 1831/81, the Commission has set forth the reasons which caused it to amend the method adopted by Decision 2794/80 for calculating reference-production figures; it was neither necessaiy nor possible to give reasons for the consequences affecting each of the undertakings as a result.

The submission alleging infringement of essential procedural requirements is unfounded.

Prohibition of subsidies

The applicant argues that the determination of the quotas in pursuance of Decision 1831/81 does not rest “on an equitable basis” within the meaning of Article 58 of the ECSC Treaty: the Commission should have corrected the negative effects of subsidies granted, in contravention of the Treaty, to the steel industries in several Member States.

a) The first subparagraph of Article 58 (2) enjoins the Commission to take account “of the principles set out in Articles 2, 3 and 4” of those provisions, the prohibition of subsidies contained in Article 4 (c) is of prime importance to the existence of the common market, and requires scrupulous compliance, in particular in connection with the application of Article 58.

b) It is indisputable that Member States pay subsidies to their steel undertakings. Thus, if German steel output were to be assisted on the same scale as British output, the public authorities in the Federal Republic would have to pay German undertakings a sum equivalent to twice their authorized capital every year. No undertaking incorporated under private law can survive such a distortion of competition.

c) The objection that the objectives of the ECSC Treaty cannot all be simultaneously pursued in their entirety cannot be accepted: behaviour which, over many years, permits subsidies in some Member States fails to reconcile the various objectives of the ECSC Treaty but, on the contrary, leads to discordance between them, and this, the applicant alleges, vitiates the decision by an error of evaluation.

d) The prohibition of subsidies places the Commission under a legal duty to enforce it and, as indicated by Article 8 of the ECSC Treaty, to base its own conduct upon it. Yet the Commission has taken no action, in pursuance either of Article 4 (c), of Article 67 or of Article 88. What is more, it does not intend to have regard to the prohibition of subsidies when distributing the quotas, whereas Article 58 requires it, when establishing the quotas, to take account of any subsidies granted, cither by allowing undertakings which have not infringed Article 4 (c) of the Treaty a “bonus” in the form of higher quotas, or by inflicting on subsidized undertakings a “malus” deducted from the quotas which would normally have to be granted in pursuance of the general rules.

The Commission docs not contest that Member States grant subsidies to undertakings in the steel industry, but disputes the accuracy of the figures put forward by the applicant in that regard. At all events, the volume of such subsidies is irrelevant to the present case.

a) To the extent to which such subsidies relate to general aid for the benefit of the metallurgical industry, they do not fall within the ambit of Article 4 (c) of the ECSC Treaty. Such aids should be viewed in the light of Article 67, since they are assigned to the preserve of the general exercise by Member States of the powers retained by them in the fields of economic, industrial, regional, fiscal and social policy. Article 67 of the ECSC Treaty does not forbid the grant of general aids such as those; it confined itself to setting up a procedure for counteracting the positive or negative repercussions of those measures on undertakings.

b) The specific aids in favour of the steel industry are subject to Community rules laid down in Commission Decision 257/80/ECSC of 1 February 1980 establishing Community rules for specific aids to the steel industry (Official Journal L 29, p. 5), which was drawn up on the basis of the first and second paragraphs of Article 95 of the ECSC Treaty. That decision was replaced by Commission Decision 2320/81 of 7 August 1981 establishing Community rules for aids to the steel industry (Official Journal L 228, p. 14), which makes both specific and general aids subject to Community rules. To the extent to which specific aids to the steel industry remain within the ambit of the Community rules defined by Decisions 257/80 and 2320/81, again, they are not inconsistent with the prohibition of aids laid down in Article 4 (c) of the ECSC Treaty, as is stated in Section 1 of the recitals in the preamble to Decision 257/80.

c) At all events, since specific subsidies fall within the prohibition contained in Article 4 (c) of the ECSC Treaty, regard cannot be had to them in the context of a system of production quotas, set up by virtue of Article 58: all that the Commission has at its disposal for enforcing the prohibition of subsidies in Article 4 (c) is the procedure described in Article 88 of the ECSC Treaty, which requires it, whenever the prohibition of subsidies is infringed, to proceed against the relevant Member State in the manner provided for in cases of contravention of the Treaty. The introduction of penalties in connection with the prohibition of subsidies is not permitted in the context of the construction of the quota system. When the last phrase of the first sentence of Article 58 (2) provides that the quotas shall be determined “taking account” of the principles set out in Articles 2, 3 and 4, it is not referring to Article 4 (c), which is directed, not at the Community, but at the Member States. In cases of infringement of the prohibition of subsidies, replacing the penalty under Article 88 of the Treaty with another penalty, to be laid down as part of the quota system, would conflict with a broad principle of public law whereby public authorities are not entitled to use their powers for purposes in respect of which some other form of action is mandatory.

d) In connection with the application of Article 58 of the ECSC Treaty, the Commission has endeavoured to give a certain specific expression to the fundamental concept that conditions of competition between undertakings should be the consequence of their natural and undistorted conditions of production: the Commission has adjusted production to match the decline in demand without discriminating against, or wrongly giving preference to, certain undertakings. None the less, it is forbidden to go any further and to take account, for example, of any distortions in competition in the context of the quota system: for that purpose, it is the procedure laid down in Article 88 of the Treaty which must be applied when distortion in competition takes the form of paying a subsidy forbidden by virtue of Article 4 (c) of the Treaty.

e) The establishment of a “malus” or of a “bonus” of quotas as part of the system of production quotas under Article 58 of the ECSC Treaty may be founded only on the premise that subsidies forbidden by Article 4 (c) of the ECSC Treaty continue to be paid; the application of one Treaty provision cannot, however, depend on the infringement of another provision thereof.

Delivery quotas for the common market

The applicant complains that the contested individual decisions fix, jointly with Articles 5 and 8 of Decision 1831/81, that portion of the production quotas which may be delivered within the common market. Article 58 (1) of the ECSC Treaty contemplates only production quotas, as the Commission acknowledges in the first paragraph of Section 5 of the recitals in the preamble to Decision 1831/81. The introduction of delivery quotas by the disputed individual decisions amounts to an infringement of the Treaty and a misuse of power.

a) According to the applicant, the objective of Article 58 of the ECSC Treaty is not — contrary to what the Commission claims — to restore the balance between supply and demand on the market; neither the Treaty in general nor Article 58 thereof in particular has assigned that mission to the ECSC. In any event, restoring such a balance is achieved not only by affecting supply, which does lie within the Commission's powers, but also by affecting demand, which does not. The sole aim of the ECSC is to contribute to restoring the balance between supply and demand by affecting supply, using the means provided by Article 58 of the Treaty, which makes only production quotas — not delivery quotas — available to it.

b) The Member States have recognized the possibility of the Community's taking action with regard to deliveries, in particular in the field of steelmaking, but in Article 58 of the ECSC Treaty they deliberately specified only production quotas, not delivery quotas. Article 29 of the Convention on the Transitional Provisions confirms, the applicant claims, that Article 58 of the Treaty does not include the possibility of fixing delivery quotas. The Commission is not empowered to override the clearly-expressed intention of the States by maintaining that the situation has radically changed in the meantime. Such is not, indeed, the case: deliveries may equally well be drawn from stock, which were just as important previously as they are today.

c) The case-law of the Court also demonstrates that the Treaty does not make any tacit provision, by way of “implied powers”, for any authority on the part of the Commission to fix delivery quotas.

d) The introduction of delivery quotas caused the Commission's intervention to be extended to a field in which it was never contemplated by the Treaty, namely the volume of stocks. In practice, delivery quotas lead to a freezing of stocks. In order to prevent supply within the common market from being inflated by that part of output which, under the quota system, may not be marketed except in nonmember countries, it would have been sufficient for the Commission to fix quotas for output alone and to exclude proven exports. Far from doing so, the Commission established quotas for deliveries as a whole, thereby resorting to a method which handicaps undertakings beyond what is necessary for the attainment of its objective. The Commission thus failed to observe the Community principle of proportionality.

e) The margin of discretion available to the Commission can operate only within the framework and limits of the system which it is authorized to create, whereas Article 58 of the ECSC Treaty, whilst authorizing it to introduce production quotas, forbids it to introduce delivery quotas.

The Commission considers the objection relating to a supposed fixing of delivery quotas to be due to confusion and it is, in any event, unfounded.

a) The objection results from a misunderstanding of Article 5 of Decision 1831/81: the provision makes no allowance whatever for the fixing of “delivery quotas”. The “deliveries” by the undertakings are made up, first, of products manufactured as part of the quota fixed quarterly and, secondly, of stocks deriving from earlier production. Decision 1831/81, however, imposes no limitation on the disposal of stocks, which would have been indispensable if the decision had aimed to set up a system of delivery quotas. The purpose of Articles 5 and 8 of Decision 1831/81 is, whenever exports decline, to prevent products not sold outside the Community from being offered for sale on the common market; that would compromise the principal objective of the production-quota system, namely to adjust Community production to the slackening in domestic demand. Articles 5 and 8 prevent the ratio prevailing in any given reference period between deliveries within the common market and total output from being exceeded.

b) The only point which the Court has to decide is whether the rules provided for under Articles 5 and 8 of Decision 1831/81, which do not fix any “delivery quotas”, fall within the powers conferred on the Commission by Article 59 of the ECSC Treaty, to set up a system of production quotas. According to the Commission, the question calls for an affirmative answer. Article 58 entrusts to the Commission the structuring of the production-quota system, and defines the conditions in which it may be introduced; it also vests in the Commission in this regard a broad discretion, to be exercised properly and in accordance with the purpose for which the power was conferred on it. That purpose consists in dealing with the decline in demand in a period of crisis, and in adjusting supply to match demand. By fixing production quotas, the Community cannot entirely reach that goal except in respect of the common market, being unable to reduce supply originating in nonmember countries. A decline in demand on the markets of nonmember countries might risk inflating the supply to the Common Market of that part of the quotacontrolled production which can no longer find outlets in nonmember countries; that surplus of supply over demand, which is due to external factors, may be eliminated either by a further reduction in output or by the creation of machinery which exerts such pressure on undertakings that they themselves adjust production to the circumstances. The Commission, being required by the combined provisions of Articles 58 and 3 (a) of the ECSC Treaty to ensure that regular supplies reach the common market, whilst “taking into account the needs of third countries”, chose, by way of Articles 5 and 8 of Decision 1831/81, to hold maximum domestic supply at a constant level. That solution has the advantages, the Commission contends, of not obliging public authorities to intervene by cutting output still further and of leaving to undertakings the initiative of adjusting their production if demand from nonmember countries declines. The rules provided for under Articles 5 and 8 of Decision 1831/81 were the most consistent with market requirements and complied best with the principle that the means employed must be proportionate to the objective pursued.

c) That interpretation of Article 58 is consistent with the Treaty and with the case-law of the Court.

It is true that Article 58 gives the Commission the power only to regulate supply, but the matter is one of adjusting supply to demand and, as soon as this has been done, the balance is achieved.

Article 29 (1) (a) of the Convention on the Transitional Provisions is of no relevance, the Commission contends, to the interpretation of Article 58 of the ECSC Treaty: Articles 5 and 8 of Decision 1831/81 in no way relate to the fixing of “delivery quotas” nor, a fortiori, do they have any bearing on “deliveries from one area to another within the Common Market”.

The case-law of the Court on which the applicant relies relates solely to the question — unconnected with this case — whether the Community holds unwritten powers.

Fixing of export quotas

The objection raised by the applicant to the contested individual decisions is that they introduce delivery quotas in respect of all the markets of nonmember countries as well. Such export quotas derive indirectly from production quotas inasmuch as, leaving stocks aside, the applicant may deliver to nonmember countries only that part of its output which it is unable to sell on the home market; it can export to such countries no more than a part of its current production fixed by the Commission.

a) However, the Commission is by no means empowered to place quantitative limits on deliveries to nonmember countries. It is now empowered to organize the markets of nonmember countries, as is confirmed by Article 3 (f) of the ECSC Treaty; that provision assigns to the Commission the task of promoting the development of international trade, which is plainly not encouraged but hampered by the quantitative restriction of deliveries. The same conclusion may be reached by a comparison of Article 58 of the ECSC Treaty with subparagraph (c) of the first paragraph of Article 61 thereof: whilst the Treaty has, it is true, taken into account the problem of action with regard to exports and has authorized minimum export prices — subject to strict reserves — it has not allowed maximum quantities to be fixed either for exports or for production intended for export. That system is in keeping with the basic principles of the ECSC Treaty, leaving as it does foreign commercial policy within the competence of the Member States.

b) The Commission should have exempted from quota restrictions both deliveries to nonmember countries and consequently production intended for such countries. The Commission might have fixed production quotas simply at the level of home demand and enabled undertakings to subtract, from their production entering into the calculation of the production quota, those quantities proved to have been exported to nonmember countries, whilst at the same time adopting the relevant provisions to prevent exported products from being reimported into the Community, thereby nullifying the effect of the quota-fixing.

c) The Commission is wrong in claiming the power to impose sacrifices on the Community's steel industry with regard to the markets of nonmember countries without even ensuring that the steel industries of other countries are likewise subjected to restrictions and without any quid pro quo being forthcoming from nonmember countries either as regards external markets or in respect of imports into the Common Market.

The Commission denies that Decision 1831/81 fixes “delivery quotas” on exports; products in stock may, irrespective of quarterly output, be delivered without restriction to nonmember countries just as within the Common Market.

a) Article 58 authorizes the Commission to set up a system of production quotas. In that regard, it draws no distinction between output intended for exportation and output to be marketed within the common market. Supply as a whole requires to be reduced, no matter whether it occurs on the common market or on the market of a nonmember country; the ECSC Treaty does not merely envisage limiting output intended for the home market but takes account of a decline in demand due to developments in the world economy. The system of production quotas, being implemented in order to combat the crisis, must therefore equally take account of falling demand on the world market.

b) That conclusion is borne out by Article 3 (a) of the Treaty, which requires the Community institutions to “ensure an orderly supply to the common market, taking into account the needs of third countries”; the reference to Article 61 changes nothing, since it is not a provision designed to deal with a crisis.

c) The Community has international obligations which, according to the Commission, do not allow it to resolve indefinitely the difficulties arising on the intra-Community market at the expense of nonmember countries. Furthermore, in its own interest and — by the same token — those of its steel undertakings, the Community must ensure that it does not overcompensate by means of exports the reduction in domestic demand, otherwise it will be found that nonmember countries limit the Community's exports of steel products or even prohibit them altogether.

Assent of the Council

The applicant maintains that general Decision 1831/81 did not receive the assent of the Council of Ministers as is required by Article 58 (1) of the ECSC Treaty.

a) In the course of its meeting of 30 October 1980, the Council examined in a very general way the problem of setting up a system of production quotas, but no clear draft decision for that purpose was submitted to it by the Commission. The applicant offers to furnish evidence in that connection, inasmuch as it asks the Court to order the Commission, pursuant to Article 23 of the Protocol on the Statute of the Court of Justice, to disclose all the evidence relating to the question, in particular the documents submitted to the Council, the minutes and tape-recording of the meeting.

b) According to the applicant, the Commission has proceeded on the assumption that it is sufficient for the Council to signify its broad agreement to the establishment of a quota system, whatever its nature may be. Article 58 (1) of the ECSC Treaty, however, lays down a two-phase procedure: during the first phase, the Commission, acting on its own initiative, records the existence of a “period of manifest crisis”, without being obliged to obtain the consent of any other bodies; in the second phase it is a matter of establishing a system of quotas. The Council's assent should relate to the establishment of a specific system, elaborated in detail and submitted in the form of a decision.

c) The first paragraphs of Article 14 and Article 26 of the ECSC Treaty do not, contrary to the Commission's opinion, furnish any relevant evidence as to the content of the assent requiied from the Council.

d) The procedure under which Article 58 (1) of the Treaty is designed to provide legal authority for the decision setting up a quota system within the Community and to prevent so imperative a measure, once issued, from encountering resistance from several national governments. The Commission's legal title cannot derive from the ratification of the ECSC Treaty by the Parliaments of the Member States, whilst the European Parliament's control over the Commission is insufficient to confer on it the title provided by Article 58 (1).

e) The distinction drawn by trie Commission between various components of the quota system, some of which call for the Council's assent whereas certain others do not, is founded on indefinable criteria as to validity.

The Commission contests the applicant's line of argument on both legal and factual grounds.

a) The Council did indeed grant the assent required under the first paragraph of Article 58 (1) of the ECSC Treaty. The provision in question does not specify how “assent” should be understood; on the other hand, the general scheme and purpose of the provision show that it is unnecessary for the Commission to lay before the Council a quota system which is formulated in every detail and presented in the form of a decision.

b) Article 58 creates a decision-making process in three phases: in accordance with the first subparagraph of Article 58 (1) the Commission records, as an initial step, that the Community is confronted with a period of manifest crisis and that the means of action provided for in Article 57 are not sufficient to deal with it; by virtue of the same subparagraph, the Commission takes the second step, that of deciding to establish a system of production quotas; as the third step, Article 58 (2) authorizes the Commission to draw up the system in detail and to make it legally binding by means of one or more instruments. The Council is brought into the decision-making process at the second stage; in order to set up a quota system, the Commission must obtain the assent of the Council, but does not have to do so as regards drawing up that system and embodying it in legal instruments. The Council's assent relates to the principle of setting up a quota system, not to the details of the instruments giving it specific form and giving it legally binding force.

c) That point of view accords perfectly with the roles assigned to the Commission and to the Council by the Treaty, in particular Articles 14 and 26 and both subparagraphs of Article 58 (1).

d) The purpose of the Council's assent by no means implies that it must relate to the detailed rules of the quota system. It aims merely to confer on the Commission's decision a democratic legitimacy which derives from a separate source; it is part and parcel of the principal mission of the Council under the ECSC Treaty, namely to harmonize the acts of the Commission with those of governments as the organs responsible for the general economic policy of their countries.

e) The procedure whereby Decision 1831/81 was adopted did in fact comply with the requirements of Article 58 of the ECSC Treaty.

B — Claims in the alternative

The applicant makes four claims in the alternative, seeking a declaration that the contested individual decisions are void in part.

The Commission considers two of the claims to be inadmissible and all of them unfounded.

First claim in the alternative

In subparagraph 2 (a) of its conclusion, the applicant seeks a declaration that the production quotas fixed by the disputed individual decisions are void inasmuch as they fall short of 286000 tonnes in the case of Category I a and 340000 tonnes in the case of Category I b.

a) On the question of admissibility, it must be appreciated that the applicant is asking, not for the grant of a favour but for the partial lifting of a burden imposed on it; it is not asking that an administrative measure favouring it be adopted, but that a measure oppressing it to be declared partially void. Such an approach, the applicant maintains, is in keeping not only with the philosophy of economic law underlying the ECSC Treaty, resting as it does in principle on free enterprise and freedom of production, but also with the system of remedies created by the Treaty itself. The Commission is wrong in contending that the applicant is entitled, in this case, to do no more than bring an action under Article 35 of the ECSC Treaty for failure to act, which would be inadmissible since the matter was not first submitted to the Commission.

b) The levels claimed by the applicant for the two quotas at issue are justified by its entitlement to have the utilization rate of its Bremen No II mill brought into line with the average rate for Community plant.

According to the Commission, the request is inadmissible and illfounded.

a) The request concerns, not a “minus” but an “aliud”; it aims to have higher production quotas fixed for Categories I a and I b than were granted to the applicant. A request such as that may not be put forward except in connection with proceedings under Article 35 of the ECSC Treaty for failure to act. Hence the applicant should, in the first place, have referred to the Commission its claim for an increase in the production quotas at issue; had no higher quotas been fixed within two months, the applicant would have been entitled to bring legal proceedings against the implied refusal inferred from the Commission's failure to act. Since the procedural requirements were not observed in this case, the request is inadmissible.

b) The applicant fails to appreciate the scope of the individual decisions under challenge: the prohibition of producing quantities in excess of the quotas derives, not from those individual decisions but from Articles 4 (1) and 12 of general Decision 1831/81. It is a matter of a legislative restriction on undertakings' freedom of production; an action at law seeking to impeach the individual decisions is irrelevant and therefore inadmissible.

c) Recognition by the Court of Justice of the validity of Decision 1831/81 would automatically serve as a confirmation of the validity of the production quotas fixed in pursuance therefor and notified to the applicant by means of the disputed individual decisions.

d) In any event, the claim is baseless.

The futility of all the arguments adduced by the applicant in its support has been demonstrated during the discussion concerning the main claim.

Second claim in the alternative

In subparagraph 2 (b) of its conclusions, the applicant requests that the production quota fixed in respect of Category I a be declared void in so far as it covers cold-rolled plate over 3 millimetres thick.

a) Subsequent to the commencement of these proceedings, the Commission, it is claimed, acknowledged in this connection the unlawfulness of the individual decisions impugned: in Commission Decision 2804/81/ECSC of 23 September 1981, amending for the second time Decision 1831/81 (Official Journal L 278, p. 1), in particular, it inserted in the fifth indent of the second paragraph of Article 1 of Decision 1831/81, before the words “Cold-rolled plate of 3 millimetres and over (cut or coiled)”, the words “Hot-rolled wide strip for processing into ...”.

b) On this point, the action should not be dismissed but the Court should hold that it is unnecessary for it to give a decision on the issue, and costs should be awarded accordingly.

The Commission regards the request as unfounded on the ground that an amending decision, 2804/81, has been brought into force.

The individual decisions of 28 July and 31 August 1981 remain valid inasmuch as they incorporate the retroactive amendment to Decision 1831/81.

Third claim in the alternative

In subparagraph 2 (c) of its conclusions, the applicant seeks a declaration that the quotas are void in so far as it may be shown that production is intended for nonmember countries.

a) This claim does not have the same purpose as the main claim: it seeks a declaration that that part of the disputed individual decisions which decides to take exported production into account for the fixing of the quota is void.

b) The applicant's complaint is directed, not against a ban on exportation but against the decision to take account also of quantities delivered to nonmember countries for the purposes of determining the production quota, which thus includes exports as well.

c) The claim is justified by the line of argument advanced in support of the main claim, concerning the fixing of delivery quotas.

Tae Commission takes the view that the claim either relates to the same subject as the main claim or else seeks the annulment of a decision which it has never taken.

a) The decisions under challenge did not subject the applicant to any restriction on output intended for export to nonmember countries; the applicant is at liberty to export its entire production. The claim is pointless and therefore inadmissible.

b) The claim in the alternative presupposes that the main claim is rejected; by arriving at a decision on the latter the Court will be ruling, incidentally, on the alternative claim as well.

c) The production quotas referred to in Article 58 of the ECSC Treaty also cover production intended for nonmember countries; hence the claim is quite without foundation.

Fourth claim in the alternative

In subparagraph 2 (d) of its conclusions, the applicant seeks a declaration that the individual decisions impugned are void in so far as they determine the portion of the production quotas which may be delivered within the Common Market.

The claim is justified by the line of argument put forward in the context of the main claim.

The Commission reasserts that Articles 5 and 8 of Decision 1831/81 cannot be regarded as unlawful; hence the claim is unfounded.

V — Oral procedure

At the sitting on 15 December 1982 the parties presented oral argument and replied to questions put by the Court.

The Court ordered that part of the hearing be conducted in camera in order to enable the parties to discuss certain confidential points concerning the applicant's business.

The applicant announced that it relinquished its second claim in the alternative. It also enlarged upon the submissions and arguments put forward in support of its action, in particular the state of emergency in which it found itself, the infringement by the decision at issue of an essential procedural requirement inasmuch as the reasons stated were inadequate, the failure to observe the principle of the prohibition of subsidies, the absence of any valid assent on the part of the Council and the threat thereby constituted to the principle of legal certainty, and the unlawfulness of fixing either delivery quotas within the Common Market or export quotas.

The Commission explained the grounds on which it contends that none of the applicant's arguments and submissions can be considered well founded; the argument alleging a state of emergency was, moreover, presented out of time and is therefore inadmissible.

The Advocate General delivered his opinion at the sitting on 23 February 1983.

Decision

1. By application lodged at the Court Registry on 8 September 1981, Klöckner-Werke AG, a steel undertaking having its registered office in Duisburg, Federal Republic of Germany, instituted proceedings under the second paragraph of Article 33 of the ECSC Treaty, seeking a declaration of the nullity of certain Commission notifications in which, on 28 July and 31 August 1981, the Commission fixed, pursuant to general Decision 1831/81/ECSC of 24 June 1981 establishing for undertakings in the iron and steel industry a monitoring system and a new system of production quotas in respect of certain products (Official Journal L 180, p. 1), in relation to the applicant undertaking reference-production figures and reference quantities, together with production and delivery quotas for derived products in Category I for the third quarter of 1981.

2. In support of its action the applicant puts forward a series of submissions which may be summarized as follows: 1. Absence of proper assent by the Council to Decision 1831/81; 2. Failure by the Commission to observe its duty to guarantee, by the fixing of production quotas, a minimum utilization of productive capacity, and a lack in that regard of a statement of the reasons on which Decision 1831/81 was based; 3. Failure on the part of the Commission to take account, when fixing the production quotas, of the effects of illegal subsidies granted by certain Member States to their steel undertakings; 4. Substitution by the Commission of “delivery quotas” within the common market for the production quotas envisaged by Article 58, and fixing of quotas on exports.

3. In the alternative, the applicant claims that the Court should : (a) declare void the production quotas fixed by the contested decision to the extent to which they fall below certain tonnages for Categories I a and lb; (b) declare the production quota for Category I a void in so far as it covers cold-rolled sheet over 3 millimetres thick; (c) declare the production quotas void in so far as production is intended for nonmember countries; (d) declare the contested decisions void in so far as they prescribe a part of the production quotas which may be delivered on the Community market.

4. It became clear in the course of the proceedings that the claim in the alternative in subparagraph (b) was due to an error in the drafting of the fifth indent of the second paragraph of Article 1 of Decision 1831/81, which was amended subsequent to the bringing of the action, by Article 1 (9) of Decision 2804/81 of 23 September 1981 (Official Journal L 278, p. 1). The applicant acknowledged that that head of claim had become redundant following the amendment.

5. In relation to the other alternative heads of claim, it may be observed that the claim in subparagraph (a) above is covered by the second submission and the claims in subparagraphs (c) and (d) by the fourth submission set out above. Those claims will therefore be considered jointly with the main conclusions to which they relate.

6. It should be noted, at the outset, that the applicant's line of argument in connection with this action largely coincides with the submissions made in support of the action in Case 119/81, between the same parties, which gave rise to the judgment of 7 July 1982 ([1982] ECR 2627). In the context of this case, however, it is appropriate to bear in mind that, in the meantime, Decision 2794/80 of 31 October 1980 (Official Journal L 291, p. 1) which formed the basis of the decisions contested in Case 119/81, has been replaced by the aforementioned Decision 1831/81, and furthermore that the applicant has formulated some fresh arguments in support of its action. It will therefore be appropriate to take account simultaneously of the points of law and fact already settled by the previous judgment and the new questions raised by these proceedings.

1. Submission alleging the absence of assent from the Council

7. The applicant does not dispute the fact that the Council gave its assent in connection with Decision 1831/81. The action relates to the question whether the assent was given in circumstances consistent with the requirement of Article 58 of the ECSC Treaty.

8. According to the applicant, the Commission should have referred to the Council, not some more or less specific proposals but a fully elaborated draft text. Consequently, the Commission is required to demonstrate, if challenged, that the decision which it has taken is in keeping with the text which it has submitted to the Council and which has received the latter's approval. Failing such evidence, the decision cannot be regarded as consistent with the provisions of Community law and is therefore likely to encounter resistence from Member States. In order to review the consistency of the procedure followed with the requirements of Article 58, the applicant seeks production of the Council's minutes and of the sound-recording of its discussions.

9. That attitude on the part of the applicant is founded on a failure to appreciate either the distribution of powers intended by Article 58 or of the principles underlying the legislative system set up by the ECSC Treaty.

10. Under the first subparagraph of Article 58 (1), it is for the Commission to establish the existence of a manifest crisis. Should such a crisis become apparent and should the means of action provided for in Article 57 be insufficient to deal with it, Article 58 places the Commission under a duty to establish a system of production quotas. The power to take the appropriate measures lies, under Article 58, with the Commission, subject to the condition that it may not act except with the “assent” of the Council.

11. In laying down that form of consultation between the Commission and the Council, Article 58 did not determine its detailed arrangements. In those circumstances, it is a matter for the two institutions to provide, by common consent and in accordance with their respective powers, for the form which their cooperation shall take. The requirements of Article 58 are thus satisfied if such cooperation culminates in the Council's assenting to the “quota system” which the Commission proposes to set up, without its being necessary to require the two institutions to examine a detailed draft decision.

12. As the Court has already pointed out in its judgment of 7 July 1982, the decision of the Commission, the preamble to which recites the Council's assent, must be presumed to have been lawfully taken. The applicant has limited itself to putting hypothetical questions concerning possible irregularities which may occur in dealings between the Commission and the Council but it has failed to adduce the slightest evidence that the Council's assent was obtained otherwise than in circumstances consistent with the requirements of Article 58. There are therefore no grounds for ordering an inquiry in that respect.

13. Lastly, as far as the requirements arising under Community law are concerned, it should be observed that the system of legal redress laid down by the ECSC Treaty affords appropriate guarantees in this respect. Both the Council and the Member States are entitled, by virtue of Article 33 of the ECSC Treaty, to refer a decision of the Commission for review by the Court if they consider that the Council's assent was not forthcoming in proper circumstances. It is sufficient record that in this case Decision 1831/81 was not the subject of such a challenge within the period prescribed by the Treaty.

14. The submission must therefore be dismissed.

2. Submission alleging failure to fulfil the duty to guarantee a minimum utilization of productive capacity

15. In this case the applicant has, in substance, reiterated the arguments which it has already set forth in Case 119/81. It asserts that the quest by the Commission for an “equitable basis” implies a duty to ensure that undertakings maintain a minimum level of employment, by fixing the quotas in such a way that every undertaking is guaranteed a utilization of its productive capacity which corresponds to the Community average. In that connection, it considers that Decision 1831/81 has caused its position to deteriorate still further as compared with Decision 2794/80, owing to the fact that the new decision no longer allows for the possibility of increasing reference production in favour of those undertakings which are experiencing a utilization rate of their plant which is below the Community average, as was provided by Article 4 (3) of the previous decision, since the advantage in question was only half maintained by the effect of Article 6 (1) (b) of the new decision.

16. The applicant states that the deterioration in its position following that reduction in its quotas endangers its very existence and puts it in an “emergency situation”, it takes the view that the object of Article 58 can be achieved only by a system organized in such a way as to guarantee to undertakings an appropriate utilization of their current productive capacity and not by reference to their actual production during previous periods.

17. In connection with that submission, the applicant has also pursued its challenge relative to the Commission's assessment of its productive capacity. It takes the view that the Court, in its judgment of 7 July 1982, did not give a definitive ruling on the point, and it therefore reasserts the inference which it draws from the so-called “Kawasaki Report” of 1 May 1981. In these proceedings it has further referred to an expert report drawn up on 12 January 1982 by Professor Jeschar with the assistance of the Stein-Heurty organization, concerning the capacity of a walking-beam furnace built by the latter and forming part of the Bremen rolling-mill. In the applicant's opinion, the conclusion drawn by that report justifies a more favourable appraisal of the productive capacity of the plant in question. The applicant has further submitted an accountancy report from Wollert-Elmendorf KG concerning the amount of the additional losses to be incurred by the undertaking should the output of its rolling-mill be restricted.

18. Finally, the applicant argues that the provisions of Decision 1831/81 which brought about a deterioration in its position as compared with that under Decision 2794/80 lacks any statement of the reasons on which it was based, and that Decision 1831/81 is, for that reason, void on the ground of infringement of an essential procedural requirement.

19. It appears from an analysis of Decision 1831/81 that the Commission has thereby amended the basis for the determination of reference-production figures as previously fixed by Decision 2794/80.

20. In the first place, Article 6 (1) (a) of the new decision diversified the periods taken into consideration for the assessment of the reference-production figure. That provision maintains the principle of the taking into account of the most favourable month of production of undertakings during the period from 1977 to 1980, but it introduces two new reference periods, namely the year 1974 and the period immediately preceding the entry into force of Decision 2794/80. In the second place, the new decision omitted the possibility of adapting reference-production figures in favour of undertakings whose utilization rate lay below the average for Community undertakings. However, the advantages granted to the undertakings involved under the system laid down by Decision 2794/80, by virtue of Article 4 (3) thereof, were retained, for those undertakings, as to one half, by the effect of Article 6 (1) (b) of Decision 1831/81.

21. The explanations supplied in the course of proceedings disclose that, by amending the system in that way, the Commission intended to define the basis of calculation used for determining reference production figures in a more equitable manner for all the undertakings in the Community, by dint of taking into consideration thereafter, both a production period prior to the crisis and a period close to the introduction of the system of production quotas. The Commission considers that as a result of a better adjustment of the criteria underlying the determination of quotas to the actual situation of undertakings, there was no further purpose in resorting to productive capacity as a corrective of the reference-production figures under the system laid down by the earlier decision. While retaining, for those undertakings which benefited from the corrective, part of the advantage thereby obtained, the Commission accentuated its effects by virtue of the arithmetical mean of the two factors taken into consideration by Article 6 (1) of Decision 1831/81.

22. In that context the Commission explains that, in the light of experience, it appeared that the effect of the corrective under Article 4 (3) of Decision 2794/80 was to confer an unjustified advantage on undertakings characterized by an operating rate below the Community average, to the detriment of the other undertakings. It notes that the applicant derived greater benefit from that provision than any other undertaking. The objective of the new decision was precisely to lessen that advantage in order to do justice to protests from other less-favoured undertakings. The Commission denies that the treatment of the applicant under the new decision may be described as causing its previous position to “deteriorate”; the new decision means merely partial withdrawal of an unjustified advantage.

23. The Commission considers that, by redefining the detailed rules governing the calculation of production quotas, it has moved closer to establishing an “equitable basis” for all Community undertakings. In that connection it emphasizes, whilst recalling the reasoning set out in Case 119/81, that a system of production quotas set up by virtue of Article 58 must necessarily be based on undertakings' actual production and not on their productive capacity. An examination of capacity affords no indication as to actual output and is therefore not capable of furnishing a more useful criterion for the purpose of adapting that output to the decline in demand.

24. As the Court observed in its judgment of 7 July 1982, it cannot reasonably be denied that the Commission's choice of the criterion of actual production accords with Article 58 (2) of the Treaty, which requires that quotas shall be determined on an “equitable basis”, the judgment stressed that, unlike the criterion of productive capacity, the appraisal of which is by its nature uncertain, reference to undertakings' actual production has the double advantage of affording an objective basis of appraisal and of enabling total production to be reduced without, however, altering the various positions of undertakings on the market.

25. By reducing the advantage accruing to certain undertakings to the detriment of others, from taking into consideration an operating rate below the Community average, and in endeavouring thereby to distribute more appropriately the burden arising from the crisis amongst the undertakings of the Community as a whole, the Commission has not exceeded the limits of the discretion conferred on it by Article 58 when it provides that production quotas must be determined “on an equitable basis”.

26. It follows from the foregoing that the applicant, in demanding that the system of production quotas be organized in such a way that undertakings may find in it a guarantee of a proper utilization of their productive capacity, fails to appreciate the true purpose of Article 58 of the Treaty, which is not in fact designed to enable undertakings to exempt themselves in a period of crisis from the consequences of their earlier decisions regarding investment and output when such decisions have proved to be ill-suited to the trend of the economy.

27. Whilst it is true that measures adopted under Article 58 must enable the Community's steel industry as a whole to defend itself, on a collective basis and by a cooperative effort, against the consequences of crises occurring when demand declines, the article in no way places the Commission under a duty to guarantee to any given undertaking, to the detriment of others within the Community, such minimum production as that undertaking regards as appropriate in accordance with its own criteria of profitability and development, as the Court has already explained in its judgment of 7 July 1982.

28. As to the complaint made by the applicant concerning the determination by the Commission of the productive capacity of its business in the context of Article 4 (3) of Decision 2794/80, reference should be made to the reasoning of the judgment of 7 July 1982 which, following a detailed analysis of the history of that issue in the proceedings, unequivocally disallowed that complaint. It is sufficient to recall that the applicant had for years been supplying incorrect information on the productive capacity of its plants and that it was as a result of a review carried out on the undertaking's premises that the Commission agreed to accept a revised statement from the applicant, on which subsequent decisions on the determination of production quotas have thenceforth been based.

29. In these proceedings, the applicant has failed to supply any fresh evidence enabling that appraisal to be reconsidered. By the production of the Jeschar expert report, based on a mathematical simulation, the applicant is endeavouring to rectify one aspect of the report made by the Centre de Recherches Métallurgiques and the Kawasaki Steel Corporation, which the Court has, in any event, held to be devoid of probative value. As to the Wollert-Elmendorf opinion, it is an accountancy report whose object is to evaluate the financial consequences of fixing the production quotas allocated to the undertaking for the third quarter of 1981 as opposed to a hypothetical case advanced by the applicant and consisting of allocating quotas based on a hypothetical output corresponding to the average utilization of capacity by Community undertakings. That accountancy report, whose object is to evaluate what is financially at stake in the litigation between the applicant and the Commission, is based on an assessment of productive capacity (459000 tonnes per month = 5508000 tonnes per annum) which the Court has already expressly rejected in its judgment of 7 July 1982. The report therefore contributes no fresh evidence in relation to the question raised by the applicant on the subject of its productive capacity.

30. That issue must therefore be regarded as having been definitively settled by the judgment of 7 July 1982.

31. Lastly, as far as concerns the objection alleging a defective statement of the reasons on which Decision 1831/81 is based, the applicant takes the view that the reasons of the Commission did not find appropriate expression in the preamble to the decision, which restricts itself, on the disputed point, to affirming that the Commission has taken account “of the experience gained in managing the system set up by” Decision 2794/80. According to the applicant, the new decision is therefore void for infringement of an essential procedural requirement.

32. It should be observed in this connection, first, that the Commission did in fact show, in the paragraph of the preamble quoted, the reasons for what appears to be the essential component of the new decision, namely the adjustment of the reference periods to accord with a more suitable definition of the basis for calculating the quotas, by taking into consideration periods of production more representative than those previously adopted. That reasoning is such as to give the undertakings concerned sufficiently precise information regarding the objective pursued by the Commission. Thus the applicant's criticism really related only to the Commission's failure to state its reasons for the partial abandonment of a corrective factor — namely the reference to productive capacity — contained in Decision 2794/80.

33. According to the case-law of the Court (see, most recently, the judgment of 28 October 1982, Lion and Loiret Haentjens v FIRS, Joined Cases 292 and 298/81, [1982] ECR 3887), the statement of the reasons on which Community measures are based must be appropriate to the nature of the measure in question: it must show clearly and unequivocally the reasoning of the Community authority which issued the measure, so as to allow those concerned to take cognizance of the justification for the measure adopted and to enable the Court to exercise its power of review. In the case of a measure in the nature of a regulation, such as the general decision in dispute, the statement of reasons cannot be required to specify the often very numerous and complex matters of law or of fact constituting the subjectmatter of such instruments as long as those matters fall within the framework of thé whole of which they form part.

34. Such is undeniably the case with the provisions at issue, the scope of which might have been ascertained without difficulty by the applicant by a comparison of the provisions of the two successive decisions. It would therefore be wrong to go so far as to demand that the Commission should devote a specific explanation to a detail of the arrangements, which may be regarded as the attenuated transfer to a new decision of a corrective factor the basis and justification for which may be found in Decision 2794/80.

35. It follows from the foregoing that the submission must be dismissed.

3. Submission alleging the failure by the Commission to take account of the effects of unlawful subsidies

36. In support of this submission the applicant has repeated without modification the arguments which it put forward in its action in Case 119/81.

37. It will be recalled that the Court, in its judgment of 7 July 1982, acknowledged that the criticisms put forward by the applicant against the failure of the Commission to take action in connection with public subsidies which, in some Member States, have distorted the conditions of production and competition in the steel market were well founded. However, it should further be recalled that, in the same judgment, the Court in the first place acknowledged that that the Commission was entitled, in laying down the system of production quotas, to take account of the effect of subsidies the illegality of which has been established in conformity with the appropriate procedures; but that, in the second place, the Court held that it was nevertheless impossible to expect the measures referred to in Article 58, which are designed to deal with a crisis, to be used to counteract the effect of illegal aids granted by Member States.

38. Since no fresh argument has been adduced in this respect, it may be concluded that this submission also must be dismissed.

4. Submission alleging the substitution by the Commission of “delivery quotas” in the common market for production quotas, and the setting of export quotas

39. The applicant takes the view that the question of “delivery quotas”, which was previously the subject of the action in Case 119/81, was not resolved by the judgment of 7 July 1982 inasmuch as the Court held therein that no such concept played any part in the determination of the production quotas for the second quarter of 1981. It therefore requests that that complex of questions be reconsidered and it argues, in substance, that Article 58 empowered the Commission to take action with regard only to the production of steel and not to its marketing, whether on the common market or on export markets. The ECSC Treaty as a whole does not support the inference of “implied powers” enabling the Commission to take action with regard to the delivery of goods.

40. As to the distribution of deliveries between the domestic market and nonmember countries, the applicant takes the view that Article 58 does not empower the Commission to regulate external trade or, in particular, to curtail exports. Its view is that, under the scheme of the ECSC Treaty, commercial policy falls within the competence of Member States. The applicant explains that the Commission was empowered to fix production quotas only at the level of domestic demand, and to permit undertakings to deduct from the output to be taken into account, for the calculation of production quotas, those quantities proven to have been exported to nonmember countries.

41. As the questions raised are the subject, in Decision 1831/81, of more explicit rules than those in the previous decision, it is appropriate to consider once more the applicant's arguments in the light of the new provisions.

42. Under Article 5 of Decision 1831/81, the Commission is to fix each quarter for each undertaking its production quota and the part of such quotas which may be delivered in the common market. The detailed rules for that distribution are dealt with in Articles 8 to 11; under Article 11 (5), deliveries in respect of which an undertaking does not show proof of export outside the territory of the Community are to be deemed to have been made within the commojļ market.

43. It follows from those provisions as a whole that the Commission is to fix for each undertaking a comprehensive production quota within which it specifies that part which may be disposed of within the common market, the balance of which may be delivered within the markets of nonmember countries. Article 9 of the decision provides for separate abatement rates for establishing the production quotas and the part thereof which may be delivered within the common market. The prevailing abatement rates for the third quarter of 1982 were fixed, pursuant to that provision, by Decision 1833/81 of 3 July 1981 (Official Journal L 184, p. 6).

44. In its judgment of 7 July 1982, the Court stressed that, owing to the very nature of the machinery envisaged by Article 58 of the Treaty, any restriction of production has an impact both on opportunities of selling on the Community market and on export opportunities. As the Commission has rightly explained, the laying down of production quotas would be ineffective if undertakings were to remain at liberty to export quantities without any supervision to nonmember countries, since the effect of such exports might be not only to compromise the interests of the Community in those markets but also to deflect some of the goods back to the domestic market and to jeopardize its equilibrium.

45. The judgment of 7 July 1982 also emphasized that it lies within the discretion of the Commission to take trade with nonmember countries into account in the context of the measures to be adopted in pursuance of Article 58. In that respect it is, in fact, for the Commission to take account both of the needs of the common market itself and of the interests of the Community in its relations with nonmember countries. Whilst it is true that Article 58 empowers the Commission, in periods of manifest crisis, to take action with regard to production without regard to trade with nonmember countries, the provision cannot be interpreted as meaning that it permits no more than the allocation to every undertaking of a comprehensive production quota which may be disposed of either on the domestic market or on the market of nonmember countries.

46. It follows that the Commission did not exceed the powers which it derives from Article 58 when, in the contested decision, it fixed separate quarterly reference-production figures and reference quantities for the application of the abatement rates governing the determination of the production quota and of that part of production which might be delivered on the common market.

47. That submission must therefore also be dismissed.

Costs

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

49. As the applicant has failed in its submission it must be ordered to pay the costs.

On those grounds, THE COURT (Fourth Chamber) hereby:

1 Dismisses the application;

2 Orders the applicant to pay the costs.