Court of Justice 17-07-1959 ECLI:EU:C:1959:18

A — Was the application against the letter of the CPFI of 12 May 1958 lodged within due time?

As the application was lodged on 30 June 1958, the defendant raises the defence of inadmissibility, on the ground that the time-limit laid down in the third paragraph of Article 33 of the ECSC Treaty and in Article 85 of the Rules of Procedure of the Court of Justice of the ECSC was not observed.

The applicant merely replies that “on general principles” it is up to the administration from which the decision has emanated to prove that the time-limit has not been observed.

The parties did not produce any indication as to the dates when the said letter was sent and received.

B — Do the respective letters of the DPFI of 12 May 1958 and of the OCCF of 2 June 1958 constitute decisions?

In the opinion of the defendant these letters do not constitute decisions, so that no application for annulment may be brought against them. That in turn prevents the applicant from calling in issue the legality of the letters of 18 December 1957 and 17 April 1958.

1. The letter of 12 May does no more than point out the binding nature of general decisions of the High Authority, in particular the letter of 18 December 1957, and invites the applicant to comply with those decisions. It cannot, therefore, have created an obligation for the applicant.

2. As the letter of 2 June, its significance consists simply in the fact that the OCCF thought that it should wait for the judgments of the Court before taking a decision on the requests for an exemption, and that in the meantime it was asking the applicant to rectify its declarations in accordance with the rules in force. It is impossible to find any element of compulsion in this.

The applicant opposes this way of looking at the matter.

1. The letter of 12 May does indeed constitute a decision. It is an “imperative order” stating in precise terms the amount to be paid.

2. The letter of 2 June also contains a decision: it suspends the granting of an exemption until the decisions of the Court are known, and it invites the applicant to rectify its declarations. Were the applicant not to do so, a decision ordering compliance could have been sent to it.

A — Case 32/58: Action for failure to act

The defendant denies that it was under an obligation to take a decision in the sense meant by the applicant (first paragraph of Article 35), that is, to grant it an exemption. Further, it denies having committed a misuse of powers by omitting to take such a decision (second paragraph of Article 35).

1. It was not obliged to grant the exemption, because the applicant is not in the same situation as Breda and Hoogovens, since its works are not integrated locally with those of Régie Renault.

2. The application does not contain any element calculated to show that the High Authority has committed a misuse of powers affecting the applicant. In fact, since the letter of 18 December 1957, the High Authority has not adopted a position on any request for exemption. Therefore the applicant has not been subjected to any special treatment. Moreover, until such time as the High Authority adopts a decision ordering the applicant to comply, the witholding of a decision on the request for exemption cannot prejudice the applicant.

In this connexion, the applicant refers to its explanations concerning the High Authority's letters of 18 December 1957 and 17 April 1958. From those explanations it appears that those letters and, as a consequence, the individual decisions made under them including the implied decision of refusal “are vitiated by so manifest an infringement of the Treaty that they involve a clear misuse of powers affecting the applicant undertaking”.

The decision of refusal adversely affects the applicant, because it maintains the principle of liability to the levy.

B — Case 32/58: The applications for annulment and the objections of illegality

The applicant maintains that in its letters of 18 December 1957 and 17 April 1958 the defendant has established a definition of “own resources” which is too narrow. In fact, in order to distinguish “bought ferrous scrap” from “own resources”, the criterion of the company name is too limited, and the exceptions admitted by the defendant ought not to have stopped at the criterion of “local integration”, but ought to have included economic groups such as that formed by the applicant and Régie Renault.

The applicant raises the submissions of infringement of the Treaty and misuse of powers against the contested measures.

1. The application of the concept of “bought ferrous scrap” to the tonnages delivered by Régie Renault is erroneous. The truth is that there is no purchase and sale, but rather an exchange. In the relationships between the two undertakings, the purchase and sale prices “are merely prices fixed for convenience. They can even be fixed arbitrarily and on a flat-rate basis at a given rate in no way connected with the real market rate”.

2. The restrictive interpretation which the defendant gives to the concept of company name in its letter of 18 December 1957 is contrary to the aims of the Treaty which refers primarily to economic market concepts and does not intend to hamper industrial groups. Furthermore, the defendant realized this, for in its letter of 17 April 1958, it abandoned the company name criterion in favour of the criterion of “local integration”. That decision does not involve a mere tidying up of the rule laid down in the letter of 18 December 1957, but it is an addition to it that it takes industrial groups into account. However, it is vitiated by illegality because it is too limited.

   In effect, the decision must be interpreted as meaning that, amongst the circumstances which are evidence of the existence of economic ties between several undertakings, local integration alone is to be taken as justifying exemption from the levy. That interpretation arises from the fact that the undertakings to which the exemptions were granted, Breda and Hoogovens, form economic entities with the undertakings with which, in addition, they are locally integrated. Such a difference in treatment, which excludes integrations so clear-cut as the one which exists between the applicant and Régie Renault, is arbitrary and discriminatory. It gives an added advantage to certain undertakings which, since they do not have to bear the transport costs of the scrap which they use, are already in a privileged position and, on the other hand, it worsens the situation of the applicant. Thus, instead of establishing competitive balance, the defendant has accentuated the existing imbalance.

   The criterion of local integration is calculated to favour activities by undertakings which are not entirely scrupulous and to encourage the practices prohibited by Article 67.

   It also seems that in adopting the contested criteria the defendant was influenced by the desire to facilitate and to reduce its inspections, a purpose which is not in the public interest.

3. The defendant has not taken the applicant's particular position into account. Having established itself in the Alps in order to benefit from the supply of cheap energy, it has to bear high transport costs. The defendant is wrong in asserting that here are an advantage and a disadvantage which cancel each other out. From the time of the nationalization of the production of electricity in France, and from the time when the reduced rates for the carriage of ferrous scrap were withdrawn at the instigation of the High Authority, the applicant has been put at a serious disadvantage. The equalization levy can only make matters worse. The applicant might have to close down and dismiss 700 workers. Yet the purposes of the European Treaties are directed to preventing the phenomenon of underdeveloped regions.

   For all these reasons, the contested decisions create discrimination between undertakings in similar positions and infringe the principle of free competition laid down by the second paragraph of Article 2 and Articles 3(b) and 5 of the Treaty. In addition they constitute a misuse of powers because the purpose achieved is contrary to the purpose of the financial arrangements and of the Treaty itself.

The defendant points out the essential purpose of the financial arrangements in question. It is to make possible the importation of ferrous scrap at prices comparable with those charged within the Community, so as to maintain normal conditions of competition between undertakings. The interpretation of the concept of “own resources” should have regard to that purpose in order that each undertaking shall bear a fair share of the levy imposed. The definition chosen is beyond criticism. For in legal language “own” things are decribed as those which belong to the “owner”. It follows that an undertaking can only consider as own resources ferrous scrap recovered in its own establishments, carrying the same company name. In addition, the definition has the advantage of being easy to apply and thus of preserving the principle of equality between undertakings.

1. The applicant and Régie Renault are two different legal persons. Therefore movements of goods occurring between them require contracts which contain all the elements of a contract of purchase. They are made at a given price. If this were only a “price of convenience” the productivity of the applicant's factory could not be established on a realistic basis, although to do so was, as the applicant has itself admitted, one of the very purposes of its legal separation from Régie Renault.

   One cannot talk in the present case of a mere exchange of finished products against ferrous scrap. It is not entirely true to say that the applicant only receives ferrous scrap from Régie Renault and does not sell its products exclusively to the latter.

   However, exchange, like sale, is a contract involving an obligation. In fiscal law, an exchange is treated at one and the same time as a purchase and a sale.

   The criteria suggested by the applicant, namely the “economic and industrial group” and “group ferrous scrap” are much too vague. Furthermore they are in contradiction to Article 2 of the decisions instituting the financial arrangements. According to those decisions “the undertakings defined in Article 80 of the Treaty” shall be subject to the contribution.

   If the defendant were to accept the applicant's suggestion, it would in many cases have to exempt from the contribution ferrous scrap circulating between undertakings which form a group. What would then happen to the equalization scheme?

   Finally, the applicant's proposition would result in placing undertakings which do not form part of a group in unequal competitive positions.

   For all these reasons, the letter of 18 December 1957 is justified.

2. The same is true of the letter of 17 April 1958. The applicant is wrong in interpreting it as a “rectification” which substitutes for or adds to the criterion of the company name that of the “industrial group”. The purpose of the letter was simply to state the reasons which justified the exemptions granted to Breda and Hoogovens, namely the fact of local integration. It even takes the care to state that it is not economic integration as such which is decisive. Although the expression “industrial Group” was used, this was exclusively in the geographical sense. There is no contradiction between the two letters, for the second constitutes an exception which confirms the rule adopted in the first. Furthermore, this exception is perfectly justified. Unity of plant location is a criterion which is easy to test and easy to apply. The criterion also accords entirely with common sense, because the works in question form a compact block without its being possible to distinguish where the property of one owner begins and that of another ends.

   The danger mentioned by the applicant, namely that unscrupulous undertakings could artificially achieve local integration in order to evade equalization, is extremely hypothetical.

   The defendant opposes the assertion that it adopted the contested definition for reasons of administrative convenience.

3. The defendant does not deny that the applicant's working conditions involve certain disadvantages. But that is the consequence of its own organization and, in any event, of circumstances foreign to the matter in dispute. The applicant itself admits that Régie Renault expected certain advantages from giving it legal autonomy. It is natural for the parties concerned to bear the disadvantages also.

   The applicant does not prove that the equalization levy would force it to dismiss its 700 workers.

C — Special features of Case 33/58

In this case, the applicant directly and exclusively contests the letter of the High Authority of 17 April 1958, which it considers to be vitiated by misuse of powers affecting it.

1. The letter from the CPFI of 12 May 1958

2. The action for failure to act

The applicant's letters of 31 March 1958, addressed to the Brussels agencies, can be considered as claims lodged with the High Authority and setting in motion the procedure under Article 35 of the ECSC Treaty. This, moreover, is not denied by the defendant.

The defendant does not raise any objections as to the admissibility of the action for failure to act, in that it admits that no decision was adopted within the period of two months laid down in the third paragraph of Article 35 of the ECSC Treaty. That question, however, must be examined by the Court of its own motion.

It appears from declarations made by the defendant and from the documents produced by it that the letters of 31 March 1958, by which the applicant lodged requests for exemption with the OCCF and the CPFI respectively, reached those agencies on 1 April 1958. According to a generally accepted rule, time-limits are calculated exclusive of the day of the measure which sets times running, save where provided otherwise. Thus the abovementioned period of two months began to run on 2 April and expired on 1 June 1958.

The letter from the OCCF of 2 June, which was in answer to the abovementioned request for exemption, thus came into existence after the expiry of the time-limit involved. Accordingly, quite apart from the question whether or not that letter constitutes a decision, it is established that the administration did not take any decision before the expiry of the said time-limit.

Therefore, under the third paragraph of Article 35 of the ECSC Treaty, the High Authority is deemed to have decided, on 1 June 1958, to refuse the request for exemption.

The application against that implied decision of refusal is therefore admissible.

3. The application against the letter from the OCCF of 2 June 1958

It is only “in so far as is necessary” that the applicant contests the said letter, which it describes as a “decision to postpone taking a decision”.

The Court has declared that the application for the annulment of the letter of 12 May 1958 and the action for failure to act in respect of the implied decision of refusal are admissible.

In these circumstances, there is no need to rule on the admissibility or the substance of the application against the letter of 2 June 1959.

1. Can the applicant raise an objection of illegality against the letters of the High Authority of 18 December 1957 and 17 April 1958?

According to the established case-law of the Court, an undertaking which contests an individual decision is entitled to raise the objection of illegality against the general decisions on which they are based.

The parties are in agreement about the fact that the letter from the CPFI of 12 May 1958 and the implied decision of refusal of 1 June 1958 are based on the principles set out in the abovementioned letters of the High Authority; and such indeed is manifestly the case. The question therefore arises whether those letters constitute decisions.

2. May the Court examine the legality of the principles set out in the letters of 18 December 1957 and 17 April 1958?

From the moment when the principles set out in the abovementioned letters were applied by the administration, they formed part of the interpretation and application of Decision No 2/57.

The High Authority's interpretation has affected the applicant's rights from the moment when the agencies to which the letters of 18 December 1957 and 17 April 1958 were addressed applied that interpretation in respect of it.

The question should therefore be examined whether the interpretation of Decision No 2/57, as it appears from the letters of 18 December 1957 and 17 April 1958, is legal.

3. Is it legal to subject group ferrous scrap to equalization?

1. Article 2 of Decision No 2/57 provides that “undertakings of the kind described in Article 80 of the Treaty which consume ferrous scrap shall be assessable to payment of contributions” under the equalization scheme.

   Article 4 of the same decision states that those contributions shall be calculated on the basis of supplies of “bought ferrous scrap” whereas “own resources” shall be exempt from equalization.

   The deliveries of ferrous scrap to the applicant by Régie Renault constitute purchases, because there is an agreement for the passing of property against a price.

   By reason of that fact, according to the wording of Decision No 2/57 such scrap is subject to equalization. The applicant requests exemption, taking the view that group scrap should be assimilated to own resources. It is therefore necessary to examine whether such assimilation is justified.

2. As appears from a reading of the letter of 18 December 1957, the High Authority interprets the concept of “own resources” as meaning that it is only scrap recovered by an undertaking in its own establishments bearing the same company name that is considered as “own resources”, whereas scrap supplied by a works run under another company name is considered as bought scrap, even in the case where close financial or administrative links exist between the supplier and the user.

3. However, it is necessary to examine whether the assessing of group scrap to the levy—and the exemption for own arisings—is compatible with the purposes of the financial arrangement constituted by the equalization system.

   1. According to the applicant, there is no valid reason for subjecting group scrap to the equalization system, because the operations between the various affiliated undertakings take place outside the market in ferrous scrap and do not, by reason of that fact, exercise any influence on the evolution of prices.

      According to the applicant, the purpose of equalization is to maintain the prices of ferrous scrap at a reasonable level, so that any transfer of scrap not liable to have repercussions on the level of prices must be exempted from equalization.

      In fact, the purpose of equalization is to maintain the price of ferrous scrap at an acceptable level; however, in order to achieve that objective the High Authority has established financial arrangements the principle of which is to ensure that the excess price of imported ferrous scrap is borne by all the consumers of ferrous scrap.

      It is not participation in the ferrous scrap market which gives rise to the equalization levy, but the consumption of ferrous scrap.

      All consumers are therefore automatically required to pay equalization contributions in order to finance the equalization fund.

      Therefore, this complaint put forward by the applicant must be rejected.

   2. However, Decision No 2/57 provided for a distinction between bought ferrous scrap and own resources, and this constitutes, as regards the latter, an exception to the general rule mentioned above.

      It is therefore necessary to examine whether the exoneration of own resources is legal.

      That exception primarily concerns own arisings from the production of steel by the undertakings subject to the jurisdiction of the Community.

      If those arisings were subject to equalizations contributions, there would be a probability of charging the same quantity of ferrous scrap twice over, which would be manifestly unjust.

4. The reasoning set out above is confirmed by the concept of discrimination as it appears in particular from the second paragraph of Article 2 and Articles 3 (b), 60 and 67 of the Treaty.

   1. On the basis of the abovementioned provisions there may be considered as discriminatory in principle and, accordingly, prohibited by the Treaty, inter alia, measures or interventions, even those emanating from the High Authority, which are calculated, by substantially increasing differences in production costs otherwise than through changes in productivity, to give rise to an appreciable disequilibrium in the competitive position of the undertakings concerned.

      In other words, any intervention attempting to distort or actually distorting competition artificially and significantly must be regarded as discriminatory and incompatible with the Treaty, whilst measures which take into account the internal organization of an undertaking and the use by it of its own resources cannot be regarded as discriminatory.

      The use of its own arisings by a single undertaking producing steel and using ferrous scrap amounts to a production recycling of one of its by-products.

      This being so, such a use in the process of the production of steel from ferrous scrap clearly represents an increase in the quantity of steel obtained from the same quantity of ferrous scrap, which has already been subjected to equalization. It thus represents an acquired increase in productivity.

      To say that an intervention encouraging those internal measures of economy distorts competition is the very opposite of the truth. Such an intervention favours changes in productivity in the direction of greater productivity, by the form of competition described in German as “Leistungswettbewerb”, and therefore accords with the Treaty.

      Moreover it appears from Annex II to the ECSC Treaty, second paragraph of (b), that “undertakings” own arisings' enjoy privileged treatment even in the case of a direct intervention under Article 59 of the Treaty. Therefore a fortiori they must also receive privileged treatment in the application of indirect measures of intervention such as those authorized by Article 53.

      It follows from everything that has been said above that the exemption of own resources is not discriminatory and is therefore legitimate.

   2. To assimilate group scrap to own arisings would be to go beyond the meaning of and the reason for the exemption and would constitute a discriminatory advantage as regards other undertakings.

      The lowering of production costs consequent upon an exoneration for group scrap would, in the words of Article 67 of the Treaty, be liable substantially to increase differences in production costs as between those undertakings and those which also produce steel from ferrous scrap but which are not integrated with an undertaking producing that raw material.

      That increase in the differences in production costs would not result from changes in productivity, but would be the effect of contingent, geographical, administrative or financial ties, which are at the basis of the concept of a ‘group’. It must be observed from the scheme of the Treaty and from its fundamental principles that the word ‘productivity’ refers exclusively to the results of the efforts made by an undertaking. In particular, it must be understood as against any improvement in the competitive position of an undertaking which is due either to interventions of public authorities or to the creation of a cartel or a concentration, because all these operations, even where authorized or capable of being authorized, artificially alter the normal effect of competition.

5. It would be manifestly contrary to the requirements of the Treaty if, as a result of an intervention on the part of the High Authority, the production costs of steel manufactured in whole or in part from ferrous scrap were to depend on the legal, administrative or financial structure of industrial groups.

   The changes in the legal structure of the group, the existence of which is stressed by the applicant, only go to show that such changes are arbitrary and available upon a moment's notice, and so prevent their being seen as a factor specific to the productivity of the steel-producing undertaking.

6. For all these reasons, although the exoneration of own arisings is compatible with the provisions of the Treaty, an exoneration for group scrap would bring about discrimination prohibited by Article 4 of the Treaty.

   In view of that fact, the latter exoneration must itself be taken to be prohibited by the Treaty, without its being necessary, in the present case, to rule on the question whether or not ferrous scrap originating from an undertaking which is not a producer of steel and is not, therefore, subject to the jurisdiction of the Community should, for that reason, be exempt from equalization, even if it forms part of a group with the undertaking using the ferrous scrap or is run under the same company name.

   It results from the foregoing considerations that the defendant acted legally in applying the principle that so-called group ferrous scrap must be considered as bought ferrous scrap and, therefore, as subject to equalization, and in reaffirming that principle in its letter of 18 December 1957.

   The applicant neither discusses nor contests the method of calculating the amount which it is called upon to pay in the letter from the CPFI of 12 May 1958, but only the principles upon which it is charged.

   Therefore the application for annulment of the letter of 12 May 1958 from the CPFI is unfounded.

4. Is the action for failure to act well founded?

The applicant has also alleged that the High Authority has exonerated certain undertakings in so far as they consume ferrous scrap from works which, without bearing the same company name as the consumer works, are ‘locally integrated’ with the latter.

However, the applicant has not raised the question whether such exonerations are compatible with the purpose and the scheme of the equalization system.

Moreover that question cannot be decided in the context of the present dispute.

The fact that the High Authority or its departments may, in certain cases, have given too wide an interpretation of the concept of ‘own arisings’ cannot justify the grant of an exemption from the levy in other more or less comparable cases, since such grant is contrary to the very principles of the equalization system.

On those grounds, since the request for exemption submitted by the applicant is unfounded, its action for failure to act in respect of the implied decision of refusal must be dismissed.