Judgment of the Court of 14 December 1962.

1. Submissions and arguments of the applicant.

Where the applicant cites actual facts, these relate only to the Van der Grift case.

It maintains that the acts of fraud in question have caused it direct loss, as, for the financial years in question, it has had to contribute under the equalization scheme a greater sum than if the payments made in error had not been effected. The High Authority itself admitted that the sum paid in error amounted in total to $646 200. It appears, however, that the sum is in reality five times greater.

The applicant states that the urgency of its case compelled it to claim damages immediately, since the provisions of Article 40 of the Statute of the Court of Justice of the ECSC on the period of limitation might otherwise be pleaded against it.

The alleged loss is caused by a wrongful act or omission on the part of the defendant or of the agencies in Brussels or the regional offices, which amounts to the same thing from the legal point of view.

1. By its Decisions establishing the financial arrangements for the equalization of ferrous scrap, the High Authority had explicitly guaranteed to the undertakings concerned that it would ensure that these arrangments functioned faultlessly and, thereby, that it would ensure that acts of fraud such as those in the present case were prevented. In this respect the applicant refers in particular to the eighth recital of the preamble to Decision 14/55. The High Authority has failed seriously in its duty to exercise due care. It cannot plead in its defence that the acts of fraud in question were unforeseeable, as the opposite is indicated by past experience. Furthermore, the undertakings are entitled to require that the High Authority should exhibit a higher degree of care than an ordinary administration.

   The acts of fraud would not have occurred if the responsible departments had exercised care:

   • to issue in advance strict provisions on the preliminary examination of requests for equalization payments;

   • to issue certificates indicating the origin of the ferrous scrap as ship-breakers' yards on their own responsibility instead of delegating this function to the Dutch Ministry for Economic Affairs;

   • to require the undertaking Cracau Metalen of Vlissingen (which was implicated in the Van der Grift case) to furnish proof that the ships in question had in fact been broken up;

   • to carry out an inspection by sampling to check that the ferrous scrap for which equalization payments were claimed was in fact from ship-breakers' yards and, if necessary, appointing sworn experts to carry out an inspection on the spot;

   • to require the parties concerned to produce photocopies of the invoices of the ship-breaking undertakings together with banking documents establishing the payment of those invoices;

   • to require the Dutch Ministry for Economic Affairs to produce photocopies of the original certificates of origin. The certificates issued by the Dutch official created the impression by the use of a false registration number that these originals existed. The negligence of the High Authority emerges moreover from the fact that it never obtained information on the steps taken by the Dutch authorities for issuing ship-breaking certificates; these only came to the notice of the High Authority in 1959 following a statement made by the Dutch Minister in the National Parliament.

   It is no longer possible to claim that the circumstances at the time did not give any grounds for suspicion. On the contrary, the agencies concerned must have noticed that an undertaking as small as Cracau Metalen in the course of a single year offered the Community more than 22 000 metric tons of ferrous scrap from ship-breakers' yards.

2. Moreover, the High Authority and the agencies in Brussels had admitted on several occasions that a wrongful act or omission had occurred.

   Thus, the reply of the High Authority to written question No 59 of Deputies Van der Goes van Naters and Nederhorst (OJ 20. April 1958, pp. 22/58 et seq.) states:

   • that the tonnages of ferrous scrap affected by the acts of fraud ‘were sold through the medium of the OCCF’;

   • that ‘the High Authority came to the conclusion that the system used by the Fund for checking the origin of the ferrous scrap qualifying for equalization payments must be rectified, especially the liaison between the Fund and the regional offices in the countries of the Community’;

   • that in a letter to the President of the Board of the Fund, the High Authority ‘asked for information on the steps proposed to remedy the deficiencies in the functioning of the system presently in force’;

   • that the agencies in Brussels authorized their President to seek counsel's opinion on the legal measures to be taken with regard to compensation'.

   In a letter to Mr Bentz Van den Berg, President of the CPFI, the Vice-President of the High Authority expressly stated that the acts of fraud had been able to continue for so long because regional offices had for too long a time retained the files which they are required to submit to the Fund and because certain regional offices had failed to carry out the instructions of the Fund on the inspection of certificates of origin. The letter ends with a request to notify the High Authority of the measures which werecontemplated ‘to rectify the situation which had caused the Fund to function so badly’. Far from challenging the justification of these complaints Mr Bentz Van den Berg stated in his reply that a committee was shortly to meet to work out improved measures for investigating requests for equalization. Since then, numerous regulations were in fact issued for this purpose, providingin particular for the production of a whole series of supporting documents. It is incomprehensible that, despite all these factors, the defendant can continue to maintain that at the time it exercised all possible care. Moreover, even if the regional offices had submitted the documents more quickly, this would not have prevented the acts of fraud. The allegation by the defendant that the claims had to be dealt with swiftly, as it was important to the claimants to obtain the equalization payments quickly flagrantly contradicts the statement by its Vice-President that the regional offices retained the files too long. The defendant cannot plead that it had no right to supervise the activities of national administrations. On the contrary, it is competent to exercise such a supervision and it is obliged to do so insofar as measures of this nature are shown to be necessary to prevent Community undertakings, the interests of which it is obliged to protect, from suffering injury.

2. Submissions and arguments of the defendant

The defendant cites in particular the findings in the aforementioned judgment in the FERAM case to show that the allegations of the applicant are without foundation.

It emphasizes in particular that:

1. The applicant has failed to prove any actual injury. The High Authority has taken measures to recover the equalization sums paid in error, so that it will still be possible subsequently to correct the amounts of the levy. It is unnecessary to consult an expert, since the exact amount of ferrous scrap for which equalization payments have been illegally granted is known.

2. The arguments of the applicant do not establish a wrongful act or omission on the part of the High Authority or on the part of the agencies in Brussels — which, in the opinion of the High Authority, amounts to the same thing. The wrongful act or omission of the Dutch official cannot be imputed to the High Authority. The events which led to the irregularities in question were not foreseeable, even judged by the most severe criteria as to the requisite standard of care.

   It is impossible to see why the swifter submission of files by the regional offices would have been capable of preventing the acts of fraud, since the falsified certificates gave every outward appearance of authenticity as far as their form is concerned.

   The applicant draws false conclusions from certain statements by the High Authority and from the correspondence between its Vice-President and Mr Van den Berg. In particular nothing therein can be regarded as constituting an admission of a wrongful act or omission.

   If in it there was a mention of improving the existing rules, it must be borne in mind that any organization can always be improved. The responsibility of the High Authority for the functioning of the equalization scheme is entirely of a political nature; there is no ‘objective’ liability on its part.

3. The fact that the responsible departments of the Community recognized the certificates issued by the Dutch Ministry as supporting documents does not constitute a delegation of its powers, but merely the recognition of documents which a national agency issued in the exercise of its constitutional powers.

1. Liability of the High Authority on the basis of a guarantee given by it

The applicant infers the liability of the defendant from the fact that the latter, in its decisions establishing the equalization scheme, formally undertook to ensure a faultless service; this commitment extended also to iron and steel undertakings of the Community. This emerges from the eighth recital of the preamble to Decision 14/55 in which the High Authority declared that it ‘is responsible for the regular functioning of the financial arrangements and hence must always be in a position to intervene effectively’.

The establishment of the financial arrangements and the principle enunciated in the recital to the above-mentioned general Decision, of the liability assumed by the High Authority for the regular functioning of this scheme, belong to the political and administrative sphere, and cannot thus constitute an obligation to the undertakings under its authority or a guarantee giving rise to objective, contractual or legal liability on the part of the High Authority, even when no wrongful act or omission can be imputed to it.

This submission must therefore be dismissed.

2. Liability for a wrongful act or omission

The application is moreover principally based on Article 40 of the ECSC Treaty which allows the injured party to bring an action to obtain pecuniary reparation from the Community to make good any injury caused in carrying out the said Treaty by a wrongful act or omission on the part of the Community in the performance of its functions.

1. The official of the Dutch Ministry for Economic Affairs, who fraudulently issued the certificates in question, was not subject to the control of the High Authority and did not receive orders from it, but acted in his capacity as a national official.

   If, in accordance with the system applied by the High Authority, certificates issued by the Dutch Ministry were recognized as supporting documents without further checking, it cannot be inferred from this that the official whom the Ministry had charged with issuing the said certificates acted on behalf of or in the name of the Community. The wrongful act committed by this official cannot therefore be imputed to the defendant. No other personal wrong committed by a servant of the defendant in the performance of his duties has been established.

2. It is also necessary however to consider whether there was a wrongful act or omission on the part of the defendant within the meaning of Article 40 of the ECSC Treaty, because of its failure to provide a better organized system for issuing the certificates of origin for ferrous scrap qualifying for equalization payments, and in particular because of its failure to provide for the investigation of the authenticity of the said certificates.

At first sight, the fact that it was possible for the abuses complained of to continue for several years appears to indicate that the organization was defective and insufficient. However that conclusion is not justified in this case. In fact, in leaving to the competent national authority the task of issuing the necessary certificates, the defendant pursued the course which appeared the most appropriate and the most likely to afford the best guarantee against any abuse. Since the certificates formed at the same time the legal basis, according to Dutch law, for the re-export of the ferrous scrap, it was natural to entrust their issue to the national authorities who, moreover, were the best qualified to carry out the necessary checks.

The issue of the certificates had not been left to a subordinate authority but to a Ministry. The Dutch regulations provided for an extremely detailed procedure prior to the issue of the certificates for checking the origin of the ferrous scrap in question; it was in fact impossible to foresee that acts of fraud could occur if this system were applied.

In these circumstances, the defendant cannot be blamed for having adopted this system and the fact of its having done so cannot in any case be described as a wrongful act or omission.

This also holds good with regard to lack of supervision. In fact, it would have been excessive to check certificates coming from a Ministry and purporting to be official documents, at any rate so long as there was no indication of abuse which could raise doubts as to their authenticity.

The argument of the applicant that the reply given by the High Authority in the European Parliament to the questions put by Mr Van der Goes van Naters and Mr Nederhorst and the letter of 24 February 1958 addressed to the President of the Equalization Fund by the Vice-President of the High Authority, Mr Spierenburg, constituted an admission of a wrongful act or omission should be rejected. Although in fact these statements did enquire how an improvement of the system could avoid such defects in future — and it was only after the acts of fraud that those defects came to light — they do not constitute an express admission that a wrongful act or omission on the part of the High Authority had occurred. They cannot moreover transform a course of action by the defendant into a wrongful act or omission — a description which such a course of action does not in fact deserve.

In its judgment in the FERAM case (Rec. 1958/1959, pp. 506 et seq.), the Court had refused a request for reparation for injury to the applicant FERAM; this request was based on the same ground as the present application, namely the existence of a wrongful act or omission on the part of the High Authority comprising its failure to provide a sufficient check on the operation of the equalization scheme.

The facts referred to by the applicant in the present dispute, inasmuch as they relate to the Van der Grift affair, do not contain any new factor which might lead the Court to abandon its position as defined in the FERAM case.

The action must, therefore, be dismissed as being unfounded.