JUDGMENT OF 11. 5. 1983 — CASE 136/82 KLÖCKNERWERKE v COMMISSION
In Case 136/82
THE COURT (Fourth Chamber) composed of: A. O'Keeffe, President, P. Pescatore, G. Bosco, T. Koopmans and K. Bahlmann, Judges, Advocate General: G. Reischl Registrar: P. Heim
gives the following
JUDGMENT
Facts and Issues
I — Facts and written procedure
Faced with a manifest crisis in the steel market within the meaning of Article 58 of the ECSC Treaty, the Commission adopted Decision 2794/80/ECSC of 31 October 1980 (Official Journal L 291, p. 1), establishing a system of production quotas for the Community's iron and steel undertakings, which was to remain in operation until 30 June 1981.
In accordance with Articles 2 to 4 of the abovementioned decision the Commission fixed, in respect of every undertaking, quarterly production quotas for crude steel and for each of the four groups into which rolled products were divided. The quotas were calculated on the basis of the quarterly reference production figures of each undertaking; to that end, reference was made, for each month of the relevant quarter, to the same month during the period from July 1977 to June 1980 during which the total production of the four groups of rolled products had been highest. The three months thus chosen formed the reference period, and the reference production figures for crude steel and for each of the four groups of rolled products were equal to the output of each of those products during the reference period.
However, in the contingencies envisaged by Article 4 (3) to (5) of the decision, the Commission might, within certain limits, increase the reference production figures and consequently the quotas allocated to the undertakings concerned. The decision further provided that, where the production or delivery restrictions imposed by it or by its implementing measures entailed exceptional difficulties for an undertaking, it might refer the matter to the Commission which, having examined the case without delay in the light of the objectives of the decision, would adapt the provisions to the specific circumstances.
On the expiry of that system, in view of the persistence of the manifest crisis, the Commission adopted the new general Decision 1831/81/ECSC of 24 June 1981 (Official Journal L 180, p. 1), whereby the quota system was extended, with some amendments.
In particular, crude steel and rolled products were separated into six categories, the first of which, (relating to the products at issue in this case) is subsequently divided into four subcategories. Only the products falling within that category — apart from a few exceptions — were subjected to the new quota system, since a “monitoring” scheme had been set up in respect of the other products.
The method of calculating the reference production for products subject to the quota system was changed, the new basis consisting of the mean of the output recorded over an extended reference period and the reference production used in fixing the quotas under the system created by Decision 2794/80. The first component of the mean is represented by production (a) in the year 1974; (b) in the 12 most favourable months of the period between July 1977 and June 1980; and (c) in the period between July 1979 and June 1980. The second component is made up of the annual production, as reconstituted from the production quotas awarded to undertakings under Decision 2794/80 during the fourth quarter of 1980 and the first quarter of 1981.
The possibility of individual adjustment which the previous decision had allowed in favour of undertakings whose rate of utilization of productive capacity was more than 10o/o below the Community average (Article 4 (3)) was abolished, and the general equity clause in Article 14, permitting quotas to be adjusted in cases of “exceptional difficulties” was restricted in the sense that it became applicable only to small-scale undertakings.
In pursuance of the legislation referred to above, the Commission informed Klöckner-Werke AG, Duisburg, in a letter of 24 March 1982, of the reference production figures and the production quotas imposed on it for the second quarter of 1982. It is common ground that the letter contains an individual decision. As far as this case in particular is concerned, in the individual decision the production quotas for products in Categories I a and I b were fixed at 188265 tonnes and 212287 tonnes respectively. The decision further fixed, for products of all categories, those parts of the quotas which might be delivered on the Community market.
Pursuant to Article 33 of the ECSC Treaty, Klöckner- Werke brought an action to have the Commission's decision of 24 March 1982 declared void (in whole, or, in the alternative, in part). The application was lodged at the Court Registry on 28 April 1982.
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. By an order of 13 October 1982, the Court decided to assign the case to the Fourth Chamber.
II — Conclusions of the parties
The applicant claims that the Court should:
1) Declare the defendant's decision of 24 March 1982 null and void;
2) Alternatively:
a) declare void the production quotas contained in the said decision to the extent to which they fall below the following figures: Products of Category la — 317922 tonnes per quarter; Products of Category lb — 358665 tonnes per quarter;
b) declare the production quotas void to the extent to which the production is demonstrably intended for nonmember countries;
c) declare the decision void to the extent to which it prescribes a part of the production quotas which may be delivered on the Community market;
3) Order the defendant to pay the costs.
The Commission contends that the Court should:
1) Dismiss the application;
2) Order the applicant to pay the costs.
III — Submissions and arguments of the parties
In support of its action the applicant puts forward five submissions, directed both against Decision 1831/81 and against the individual decision of 24 March 1982. The arguments relate to:
a) breach of the principle of minimum utilization of undertakings' productive capacity;
b) infringement of an essential procedural requirement, namely absence of a statement of the reasons on which Decision 1831/81 was based;
c) failure to take account of the effects of infringements of the prohibition of State subsidies for the steel industry;
d) the absence, or in any case the absence of proof, of the Council's assent;
e) the unlawfulness of fixing “delivery” quotas for the common market and of setting quotas on exports.
A — First submission
The applicant objects that the aforementioned general decision and individual decision contravene the principle of minimum utilization laid down in the second subparagraph of Article 58 (2) of the ECSC Treaty. It appears from that article that the production quota fixed for an undertaking may not reduce the utilization rate of the latter's productive capacity below a certain limit. That lower limit corresponds to the average rate of utilization amongst Community undertakings resulting from the reference production figures as reduced pursuant to Decision 1831/81, regard being had to the lower limit. The Treaty therefore forbids the Commission to cut back reference production by a given, uniform percentage without taking account of the rate of utilization of capacity prevailing at the outset; on the other hand, the Treaty does call for the protection of the potentially worst-affected undertakings, running the greatest risks as a result of the reduction, namely those undertakings whose capacity-utilization rate is particularly low at the outset. That derives from a general principle existing in the legal systems of all Member States, and is also in keeping with considerations of logic, since it is clearly more perilous for an undertaking cutting back production to reduce a utilization rate from 50% to 45% than to reduce it from 100% to 90%.
The individual decision under dispute does not meet those requirements. The output of the No II hot-rolled wide-strip mill in the applicant's Bremen works was recorded by the Commission as having a production potential of 355000 tonnes per month, whereas in fact its potential amounted to 459000 tonnes per month for the period from July 1977 to June 1980. The productive potential of the mill was therefore exploited at a rate of no more than 28.4%, whereas the average amongst Community undertakings reached approximately 52%.
The applicant takes the view that the figure which should be adopted as showing maximum productive capacity, and which should have been accepted by the Commission, was 459000 tonnes per month, as was demonstrated beyond any doubt by several output trials and by the expert reports prepared by the Kawasaki Steel Corporation, the Institut de Recherche de la Sidérurgie Française and Professor Jeschar of the Technical University of Clausthal-Zellerfeld. Should those reports not be considered adequate, Klöckner offers to supply further evidence. The applicant takes the view that for the purposes of fixing production quotas there is no reason to take account of previous notifications concerning productive capacity, supplied by the undertaking for statistical purposes on Questionnaire No 2/61; it is only the actual, current capacity which is decisive, because it is not permissible to compare figures relating to an earlier period with those corresponding to a later period, since the comparison must be made in terms of one and the same period.
On the basis of those suppositions, the applicant calculates the quotas which should have been awarded to it if it had been granted a utilization-rate on a par with the Community average, and concludes that for the second quarter of 1982 its quotas should have amounted to 317922 tonnes for products in Category I a and 358665 tonnes for those in Category I b. That is the calculation underlying alternative claim (a), that the decision under dispute be declared partially void to the extent to which it fixes quotas lower than the amounts mentioned above.
The applicant further observes that the expert reports supply the basis for another objection: the Commission — it maintains — has misapplied the provisions of Article 4 (3) of Decision 2794/80, and the mistake has repercussions on the setting of quotas under Decision 1831/81 pursuant to Article 6 (1) (b) thereof. For the purposes of fixing the quota it is the output capacity for 1977, 1978 and 1979 which is decisive, and the capacity of 459000 tonnes per month of the Bremen No II mill was already a reality by then: thus the quotas granted to the applicant should have been higher from the very beginning of the system and, consequently, the quotas granted under Decision 1831/81 should likewise have been higher.
The Commission objects of the outset that the submission is inadmissible, as regards both the principal claim and the claim in the alternative.
As far as the principal claim is concerned, the Commission notes that the action does not specify whether the submission is directed at general Decision 1831/81 as a whole or only a certain provisions thereof; the submission is therefore inadmissible for a lack of precision.
As far as the claim in the alternative is concerned, the Commission submits that the applicant is demanding the fixing of higher production quotas than those granted to it, whereas it cannot put forward a request such as that otherwise than in the context of an action alleging failure to act, the preconditions of which are not fulfilled. As the undertaking failed to ask the Commission at an earlier stage to fix the quotas for the quarter in question at 317922 tonnes for products in Category I a and 358665 tonnes for those in Category I b, it is precluded from challenging a decision, whether express or by implication, rejecting such a request.
The Commission takes the view that its contention that the alternative claim is inadmissible cannot be invalidated by the argument, pleaded by the applicant in Case 311/81 (pursuing an analogous aim with reference to the quotas for the fourth quarter of 1981), that the claim seeks, not the conferring of an advantage but the partial annulment of a disadvantage, namely the prohibition of producing higher quantities than those granted, with the result that the problem of an action alleging failure to act cannot arise. The prohibition of producing quantities in excess of the quota limits does not derive from the individual decision, as it was already contained in Article 4 (1) read in conjunction with Article 12 of general Decision 1831/81. Since the prohibition was not laid down in the individual decision under dispute, the action to have it declared void is purposeless in that respect and hence inadmissible.
Moreover, as regards an alternative claim to another, so-called “principal” claim, the Court, before giving its judgment on the alternative claim, must first have rejected the principal claim. However, the Court cannot reject the main claim except by holding that the submissions used in challenging the general decision are unfounded, and that the. quota system under Decision 1831/81 is indeed valid. However, the Court would thereby be upholding the validity of the production quotas resulting from that general decision, with the result that the alternative claim, too, would be pointless.
As to the substance of the case, the Commission observes that the applicant has not really explained to what extent it is possible to infer from Article 58 — or any other provision — of the ECSC Treaty either the alleged prohibition of any uniform reduction of reference production figures without taking the initial capacity-utilization rate into account, or indeed the alleged duty to protect undertakings whose initial utilization rates are particularly low. In fact no provision of that kind is contained in the Treaty, nor can it be deduced from a general principle supposed to exist in the law of all Member States. In those circumstances, any argument from the applicant seeking to demonstrate that the Bremen No II wide-strip mill has a higher output capacity than that adopted by the defendant is irrelevant.
As to the supposedly erroneous application of Article 4 (3) of Decision 2794/80 and the consequences which that mistake is alleged to have had on the fixing of quotas under Decision 1831/81, the Commission observes that its existence is the subject of separate litigation (Case 119/81). Until such time as that litigation has been settled in favour of the applicant's assertions, the fixing of quotas under general Decision 2794/80 cannot be amended, and the Commission is not in a position to use a different basis of calculation for the purpose of fixing quotas under Decision 1831/81. That being so, if the objection relates to a supposed misinterpretation of the provisions of Article 6 (1) of Decision 1831/81, it is quite unfounded.
Finally, the defendant relies on the judgment of the Court of 3 March 1982 (Alpha Steel v Commission, Case 14/81, [1982] ECR 749), according to which it cannot reasonably be denied that the Commission's choice of a criterion based on undertakings' actual production (as opposed to that of their productive capacity) may constitute an “equitable basis” within the meaning of Article 58 (2) of the ECSC Treaty.
In its reply the applicant claims that the objection of inadmissibility in respect of its alternative claim (a) is unfounded and recalls, first, the argument on the subject already set forth in Case 30/82 (relating to the production quotas fixed for the first quarter of 1982), namely that the claim seeks a declaration that a burden imposed on the applicant is partially void, not an advantage which the defendant is refusing to grant and in respect of which the applicant would be forced to bring an action for failure to act. In reply to the Commission's remarks on the point, it argues that there is no restriction on the undertaking's freedom of production until such time as the Commission has allocated to it a production quota by way of an individual decision. It is therefore that individual decision, and it alone, which gives rise to the restriction placed on the applicant, which constitutes the measure complained of, which may be the subject of an action seeking a declaration of nullity.
As far as the connection between the main and the alternative claims is concerned, the applicant emphasizes that if the Court were to allow its principal claim it would necessarily have to concede retroactively that the undertaking has never been subject to output restrictions. If, on the other hand, the Court were to conclude that the production to which the applicant is entitled is, although not unlimited, none the less higher than that granted, there would arise between the alternative and the principal claim a minimum and maximum relationship: one part of the applicant's claims would be acceded to and, at the same time, the contested decision would be kept in force.
As to the substance of the claim, the applicant reaffirms its argument concerning the existence of a prohibition of any uniform reduction in reference production figures, and of a duty to protect undertakings having a particularly low utilization rate, and the applicant specifies that those principles derive not only from Article 58 of the ECSC Treaty but also from Article 14 b, inserted into Decision 1831/81 by Commission Decision 533/82 of 3 March 1982 (Official Journal L 65, p. 6) as regards reinforcing rods.
Turning to the productive capacity of its Bremen No II mill, the applicant restates its argument in great detail, referring to the expert reports appended to the file and insisting that the data supplied to the Commission on forms for statistical returns are not binding on the undertaking, so that it must still be possible to contest them on the strength of reliable indications that they are inaccurate.
As to the Alpha Steel judgment on which the Commission relies, the applicant denies having ever challenged the principle laid down by the Court. It does, however, emphasize that when such a premise — namely the possibility of using undertakings' actual output as an equitable criterion — leads to underutilization of capacity, it is appropriate, by way of exception, to raise the rate to the level of the Community average. The question is therefore whether the Commission is entitled to grant to some undertakings quotas so low that it condemns them to wither away, and whether it is observing the limits of its discretion when, owing to the quotas granted, it destroys certain undertakings whilst sparing others.
In its rejoinder, the Commission insists on its contention concerning the inadmissibility of the alternative claim (a), being one which has no independent meaning. On the substantive issues, it refers to the judgment of the Court of 7 July 1982, Case 119/81, given in respect of an application from Klöckner itself seeking a declaration that the decision fixing the production quotas for the second quarter of 1981 was void, whereby, in conformity with the Alpha Steel judgment mentioned above, the decision resolving the problem went against the applicant.
B — Second submission
The applicant observes that the Commission did not supply reasons for putting the undertaking, by virtue of Decision 1831/81, on a worse footing than under the previous decision, 2794/80. This amounts to an infringement of an essential procedural requirement, namely an infringement of the first paragraph of Article 15 of the ECSC Treaty whereby decisions must state the reasons on which they are based.
As a preliminary matter, the Commission disputes the admissibility of the submission, alleging that insufficient grounds are stated in support thereof.
As to the substantive issue, the defendant contests the basis of the claim, contending that the quota system provided for by Decision 1831/81 did not entail a general deterioration in the position of undertakings as compared with the system laid down by Decision 2794/80. At all events, it observes that the adjustments made to that system by Decision 1831/81 were explained in the recitals in the preamble to the decision, so that the duty to state reasons has been complied with.
The applicant replies that Decision 1831/81 seriously aggravated its situation as regards products in Categories I a and I b, owing to the fact that only half of the production quota as calculated on the basis of the previous decision — pursuant to Article 4 thereof, in particular — has now been taken into account. No reasons for that deterioration were stated in the recitals to Decision 1831/81.
The Commission replies that, since Decision 1831/81 is general in its scope, it was required merely to set forth the reasons for amending the system for the calculation of reference production figures, and that was precisely what was done in the fourth recital to the decision.
C — Third submission
The applicant argues that the distribution of quotas amongst Community undertakings, in pursuance of the general decision in dispute, is not drawn up on an equitable basis inasmuch as the Commission made no allowance for the effects of subsidies granted to the steel industry in certain Member States, contrary to Article 4 (c) of tlie ECSC Treaty. It takes the view that the defendant should have taken those illegal subsidies into account, either by granting a higher quota to unsubsidized undertakings or by lowering the quota awarded to undertakings which benefited from such aids.
As a preliminary, the Commission again puts forward an objection that the submission is inadmissible inasmuch as insufficient grounds are stated in support thereof.
On the substantive issues, the Commission refers to the Alpha Steel judgment mentioned above, in which the Court rejected the argument in question, holding that Article 58 of the ECSC Treaty does not aim to rectify distortions in competition due to State subsidies, in respect of which the Commission has other means at its disposal. The defendant furthermore points to the arguments set forth in Case 244/81.
On the subject of admissibility, the applicant observes that the submission is aimed at the decision under challenge and — indirectly — at general Decision 1831/81, inasmuch as the latter omitted to draw the necessary legal inferences from the prohibition of subsidies.
As regards the substance, it refers to its pleadings in Case 119/81. It none the less produces a new document (the American “Federal Register”, Part II, “Department of Commerce”, 17 June 1982, pp. 26300 to 26348) which indirectly discloses the amount of aid granted by a number of Member States to steel undertakings.
In its rejoinder the Commission relies on the judgment of the Court of 7 July 1982 (mentioned above), in which the Court stated that the Commission was not obliged, in connection with the measures provided for by Article 58 of the ECSC Treaty, to take account of the distortions on the steel market created by the grant of aids which might be inconsistent with the Treaty; the Commission adds that the judgment, which relates to general Decision 2794/80, might equally apply to Decision 1831/81. In any event, it denies the relevance of the document produced by the applicant, contending inter alia that the concept of subsidy under American customs law does not correspond to that contained in Article 4 (c) of the ECSC Treaty.
D — Fourth submission
According to the applicant, the general decision at issue was not the subject of the Council's assent, as laid down by Article 58 (1) of the ECSC Treaty. The Commission, although asked on several occasions to produce the Council's decision giving its assent, confined itself to producing a press bulletin from the General Secretariat of the Council — a document having no relevance at all. Indeed, it was only by examining the documents submitted by the Commission to the Council for the purposes of the meeting at which the assent was due to be given, together with the minutes and the tape-recording of that meeting, that it was possible to establish whether an “assent” really was forthcoming and whether it had the content required by the ECSC Treaty. There is therefore, in the first place, a lack of evidence.
In any case, the applicant, referring to the arguments set forth in other analogous cases (Cases 119 and 244/81), maintains that the Council's assent is necessary in respect of all the constituent parts of the quota system, not merely in relation to certain supposedly essential aspects thereof — factors which are, moreover, unidentifiable except by means of an objective criterion which the Commission has been unable to specify. That being so, the Council's “assent” would not, even if it was given in this case, have the content laid down by the Treaty. In fact in Case 119/81 — in which an identical question was raised concerning general Decision 2794/80 — the Commission produced the text of its proposals to the Council for the adoption of the system of production quotas (document of 6 October 1980, COM(80) 586 Final). A comparison of that text, which the applicant wishes to have produced, in this case as well, if appropriate, with the definitive text of Decision 2794/80 would disclose the existence of many important differences. There are comparable divergencies between the text of the Commission's original proposals to the Council and the definitive text of Decision 1831/81. In those circumstances it is impossible to discover, from the documents on the file, in relation to which text the Council gave its alleged assent. Furthermore, in the absence of any objective criterion, it is impossible to check whether or not any divergencies between the two texts have a bearing on essential points. The primary requirement of legal certainty is thereby disregarded.
Both at law and in fact the Commission contests the applicant's arguments as well as the requests for production of fresh documents, which it regards as unnecessary. As may be seen not only from the preamble to Decision 1831/81 but also from many documents produced in Case 244/81 (proposal of the Commission, Doc. COM(81) 277 Final, of 22 May 1981; press releases of the Council Nos 7330/81 and 7630/81; item published in Official Journal C 196 of 4 August 1981, p. 6), the Council did indeed give its assent. The Commission adds that the first subparagraph of Article 58 (1) of the ECSC Treaty does not specify what is to be understood by “assent”; the scheme and the purpose of the article, however, show that it is unnecessary for the Commission to transmit to the Council a proposal for a quota system which is formulated in every detail and submitted in the form of a draft decision. On the other hand, Article 58 institutes a decision-making procedure in three phases. In accordance with the first subparagraph of Article 58 (1), the Commission notes, as the first phase, 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; as the second phase, the Commission takes the decision to establish a system of production quotas. Article 58 (2), as a third phase, authorizes the Commission to arrange the system in detail and to make it mandatory by means of one or more instruments. It is only in the second phase that the Council is involved in the procedure. In order to establish a quota system, the Commission must obtain the Council's assent but is not required to do so as far as its arrangement and its embodiment in legal instruments are concerned. Since those principles were observed in this case, the procedure whereby Decision 1831/81 was adopted was consistent with the requirements of Article 58 of the ECSC Treaty, whereas the subsistence of differences between the draft forwarded by the Commission to the Council and the measure adopted by the Commission, following the Council's assent, setting up the quota system, is of no importance; such differences are the result of the decisionmaking process which culminates in the Council's decision to give its assent; the Commission might indeed, following the discussion in the Council, consider that it had to amend its initial conception of the quota system. It is even possible for the Council to make its assent subject to the adoption of certain rules of the system. It is otherwise quite unnecessary to lay down an objective criterion making it possible to distinguish those portions of a decision which do, and those which do not, require assent, as the latter relates solely to the principle of establishing the quota system, whilst the task of giving specific expression to the principle falls within the powers of the Commission.
The applicant replies that the Commission's contention exposes every undertaking to very serious risk of irreparable damage, and at the same time cuts down the powers of review of the Court of Justice.
Here again, the Commission invokes in its rejoinder the judgment of 7 July 1982, mentioned above, in which it is regarded as undeniable that, in Decision 2794/80, the Commission consulted the Council in accordance with Article 58 of the ECSC Treaty and that the Council did indeed approve the measures envisaged. The Commission takes the view that the same conclusion must be arrived at in the context of Decision 1831/81, adopted as it was in entirely analogous circumstances.
E — Fifth submission
The applicant asserts that the decision under dispute unlawfully fixes the share of the quarterly production quotas which may be delivered within the common market, and the share which may be exported. The quota therefore does not confine itself to limiting production, but also limits the volume which the applicant may deliver during the quarter concerned. However, delivery quotas for the domestic market are necessary in order to prevent products not disposed of outside the Community from being offered on the common market, and to that end it would have been sufficient when fixing production quotas, to disregard proven exports; yet the Commission fixed production quotas not only for the common market but also in respect of exports to nonmember countries, whereas such a provision cannot be based on Article 58 of the ECSC Treaty. It may be considered lawful by virtue of the first paragraph of Article 95 of the Treaty, provided that the conditions for applying the article are satisfied, which is not the case here.
It was on the basis of that submission that the applicant put forward its alternative claims (b) and (c).
The Commission, as a preliminary, replies that the submission — or the part thereof which relates to the supposed setting of quota limits on exports — is, together with the alternative claim (b), inadmissible on the ground that the decision under challenge makes no provision for limiting exports to nonmember countries, so that that part of the submission and the alternative claim are without purpose.
As to the substantive issues, the Commission takes the view that the applicant has misinterpreted Article 5 of Decision 1831/81, since that provision in no way envisages the fixing of “delivery” quotas. Deliveries by undertakings comprise two elements, namely products manufactured under the quarterly quota and stocks deriving from earlier production; Decision 1831/81 lays down no limit on the disposal of stocks, whereas the matter would have had to be dealt with if it had been desired to introduce a system of delivery quotas. The provisions contained in Articles 5 and 8 of the general decision are designed to prevent products not disposed of outside the common market from being offered within the Community whenever exports are reduced. It was for that reason that it was forbidden to exceed the ratio, as fixed for the reference period, between Community deliveries and total output. The objection that the provisions are illegal is thus unfounded.
The applicant is wrong in complaining that it can export no more than a portion of its products. In the first place, products drawn from stock may be delivered without any restrictions, either within the common market or to nonmember countries. In the second place, Decision 1831/81 contains no provision limiting the share of production which may be exported, as the Community is concerned that undertakings should export their products, precisely for the purpose of relieving the domestic market.
The applicant asserts in reply that, under Article 5 of Decision 1831/81, it may export only that part of its production quota which it does not dispose of within the common market, which constitutes a quantitative restriction on exports and hence both a delivery quota and an imposition of quotas on exports. The ECSC Treaty is thereby infringed, inasmuch as it left to Member States full powers over their export systems. In that connection the applicant cites Article 59, the first paragraphs of Articles 61, 71 and 73 respectively, and Article 74 of the Treaty, together with Article 19 of the Convention on the Transitional Provisions.
In that context, again, the Commission's rejoinder refers to the aforementioned judgment of 7 July 1982, in which the Court stated that the restrictive effect which the fixing of quotas may have on export possibilities is inherent in the machinery set up by Article 58 of the ECSC Treaty, and observed that the concept of “delivery quotas” played no part in the determination of the production quotas allocated to the applicant under Decision 2794/80. The defendant considers that the case-law in question applies equally to Decision 1831/81, since the situation is in no way different.
IV — Oral procedure
At the sitting on 15 December 1982, Klöckner- Werke AG, represented by Professor Bodo Borner, and the Commission, represented by Norbert Koch, a member of its Legal Department, presented oral argument. In the course of the sitting, the Commission's representative laid two documents before the Court.
The Advocate General delivered his opinion at the sitting on 23 February 1983.
Decision
1. By an application lodged at the Court Registry on 28 April 1982, 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 the Commission's communication of 24 March 1982, in which 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 second quarter of 1982.
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 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 quotas void in so far as production is intended for nonmember countries: (c) declare void the contested decision in so far as it prescribes a part of the production quotas which may be delivered in the common market.
4. In relation to the 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 (b) and (c) by the fourth submission set out above. Those claims will therefore be considered jointly with the main conclusions to which they relate.
5. It should also 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 decision 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
6. 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 requirements of Article 58 of the ECSC Treaty.
7. 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 resistance from the 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 soundrecording of its discussions.
8. 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 the principles underlying the legislative system set up by the ECSC Treaty.
9. 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 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.
10. 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 asssenting 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.
11. 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.
12. Lastly, as far as the requirements arising under Community law are concerned, it should be observed that the system of legal remedies 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 to record that, in this case, Decision 1831/81 was not the subject of such a challenge, within the period prescribed by the Treaty.
13. The submission must therefore be dismissed.
2. Submission alleging failure to fulfil the duty to guarantee a minimum utilization of productive capacity
14. In this casé 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 the position under 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.
15. 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.
16. 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 inferences 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 by 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.
17. Finally, the applicant argues that the provisions of Decision No 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.
18. 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.
19. 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, as to one half, by the effect of Article 6 (1) (b) of Decision 1831/81.
20. 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 attenuated its effects by virtue of the arithmetical mean of the two factors taken into consideration by Article 6 (1) of Decision 1831/81.
21. 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.
22. 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 useful criterion for the purpose of adapting that output to the decline in demand.
23. As the Court has 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.
24. 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 burdens 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”.
25. 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.
26. 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.
27. 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.
28. 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 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.
29. That issue must therefore be regarded as having been definitively settled by the judgment of 7 July 1982.
30. 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 stystem set up by” Decision 2794/80. According to the applicant, the new decision is therefore void for infringement of an essential procedural requirement.
31. It should be observed in this connection, first, that the Commission did in fact show, in the pragraph 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 relates 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.
32. According to the case-law of the Court (see, most recently, the judgment of 28 October 1982, Lion and Loiret & Haentjens and Others v FIRS, Joined Cases 292 and 293/81, [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 the whole of which they form part.
33. 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.
34. 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
35. In support of this submission the applicant has repeated without modification the arguments which it put forward in its action in Case 119/81.
36. 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 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.
37. Since no fresh argument has been adduced in this respect, it must 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
38. 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 in the common market or on export markets. The ESCS 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.
39. 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 to be taken into account, for the calculation of production quotas, those quantities proven to have been exported to nonmember countries.
40. 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.
41. 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 common market.
42. 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 second quarter of 1982 were fixed, pursuant to that provision, by Decision 532/82 of 3 March 1982 (Official Journal L 65, p. 5).
43. 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.
44. 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.
45. 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.
46. That submission must therefore also be dismissed.
Costs
47. Under Article 69 (2) of the Rules of Procedure the unsuccessful party is to be ordered to pay the costs. As the applicant has failed in its submissions 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.