Order of the President of the Court of 22 October 1975.

Facts

The National Carbonising Company Limited (hereinafter called NCC) has submitted the following statement of facts which has not, in essence, been disputed.

It is a limited liability company having its registered office in England and among its activities it manufactures hard coke in two of its plants at Barnsley and Rotherham. This is sold under the trade name of Rexcoke and is suitable for domestic use.

NCC buys all the coal which it needs from the National Coal Board (hereinafter called NCB) which has a virtual monopoly of all coal production in the United Kingdom and sells 95 % of all coal used in that country.

NCB has a wholly owned subsidiary, National Smokeless Fuels Ltd. (hereinafter called NSF), which manufactures a range of solid smokeless fuels including those suitable for burning in domestic closed appliances.

The market shares of NCC and NSF in domestic hard coke in the United Kingdom for the year 1974/75 were approximately as follows:

• NSF: 88 %

• NCC: 9 %

• Others: 3 %

The cost of coal has risen sharply since 1973 and accordingly the price charged by NCB to NCC has also risen. This increase has, however, been reduced in fact by a rebate allowed on coking coal bought by NCC from NCB and used for the production of domestic coke sold in the United Kingdom.

NCC is unable to sell domestic coke at a price higher than that charged for the same type of product sold by NSF, the major supplier in the United Kingdom.

Even with the rebates on the price of coal certain increases in the selling price of domestic coke the two plants belonging to NCC have since about April 1975 incurred substantial losses. A decision to close these plants with the consequent loss of approximately 650 jobs has already been taken unless immediate steps can be taken to restore the applicant's ability to manufacture and sell domestic coke at a profit.

NCC maintains that the prices for domestic coke charged by NSF have been held down at an artificially low level at the instigation of the British Government. In support of this is refers to a meeting between the Chairman of the NCB and the Chief Executive of the NCC on 9 June 1975 and to correspondence between the NCC and the Secretary of State for Energy in June and July 1975. It also refers to the accounts of NCB for the year ended 31 March 1975, presented in July 1975, where it is stated ‘We have also suffered from national policies in the pricing of domestic cokes and briquettes to the extent that such operations are now uneconomic and are not generating funds to maintain the assets being employed. The adverse effect of the restrictions in domestic prices has been offset during the year by substantial sales from stock’.

On 21 July 1975 solicitors acting for the applicant wrote to the Commission of the European Communities explaining the problem and asking that the Commission might consider:

1. Whether the low price charged by NCB on domestic hard coke constitutes a pricing practice prohibited under article 60 (1) and, in particular, an unfair competitive practice being a temporary or local price reduction towards the acquisition of a monopoly position within the common market.

2. Whether the higher price charged by NCB for coal used for hard coke intended for export constitutes a discriminatory practice within Article 60 (1), in particular because NCC is thereby forced to sell in other common market countries at higher prices.

3. Whether in the light of all the above circumstances NCB, which we think holds a dominant position shielding it against effective competition in a substantial part of the common market, is using that position for purposes contrary to the Treaty within the meaning of Article 66 (7).

4. Whether the Commission should take urgent action under Article 67 on the grounds that the action by the British Government in restraining domestic solid fuel prices is liable to have appreciable repercussions on conditions of competition in the coal industry.

5. Whether the Commission should in the circumstances take urgent action to fix prices under Article 61.

6. Whether the British Government is, in the circumstances and in the light of Article 61 and of the Treaty as a whole, acting unlawfully in seeking to restrain NCB from raising its domestic hard coke prices.

7. Whether the Commission can or should exercise its powers, praticularly under Chapter 3 of the Treaty to grant financial aid to NCC.

By letter dated 12 Spetember the Commission wrote to NCC in the following terms:

‘Dear Sirs,

We refer to the letter by your Solicitors dated 21 July 1975 which informed us of the difficulties you were experiencing in covering your costs for domestic hard coke production.

The Commission notes, in connexion with this matter, that the National Coal Board grants a rebate on the price of coking coal only to the extent that the domestic coke thereby produced remains within the United Kingdom. The granting of a rebate in this way is contrary to the principles and provisions of the ECSC Treaty and following the intervention of the Commission, the NCB has undertaken to modify its grant of a rebate in the following manner: the rebate will be given on the same basis of calculation as before, but will be extended to the full coking coal input used for the production of domestic coke destined for sale within all member states of the European Community. A better cost/proceeds ratio can thus be realized for sales of domestic coke to member states outside the UK. This method of granting the rebate will take effect immediately.

However, we feel that we should draw your attention to the fact that all sales in member states of the European Community are basically subject to the application of the published list prices. Article 60 § 2 (b) ECSC Treaty permits the alignment only with the lower delivered price of competitors. Accordingly should you wish to charge a higher price abroad you will have to publish a correspondingly higher list price. However, you may align this price on any lower delivered price of competitors within the limits set out in Decision 72/443/ECSC (OJ L 297 of 30. 12. 1972, p. 45)

The question whether NSF in contrast to yourselves was able to show a profitable result for rheit domestic coke transactions for the June quarter is the subject of an investigation which has not yet been completed. We shall advise you of the outcome as soon as possible and also of any further action which we may propose.

Yours faithfully,

J. Verges

Director’

To this letter NCC's solicitors replied on 15 September, saying, inter alia:

‘We could like to thank the Commission for its intervention on this praticular point, which goes some way towards the relief of our client's coking plant losses.

It is, however, unfortunately the case that such extension of the NCB rebate will not by itself and without any improvement in the amount of the rebate, render the operation of either the Barnsley or the Rotherham plant viable and they are therefore still faced with closure.’

The letter continued:

‘The crucial question underlying our client's difficulties is whether the substantial change of differential between the prices of coking coal with the associated costs of manufacture, and domestic coke after 1 April 1975 and the consequences thereof amount to an abuse by the NCB of its dominant position so as to infringe Article 66 (7) and also an unfair pricing practice so as to infringe Article 60 (1).’

On 17 September NCB approached NCC to consider the possible acquisition of one or both of the latter's hard coke plants and to enable this matter to be considered further NCB persuaded the British Steel Corporation to take supplies of industrial hard coke for one month from the applicant instead of from NCB. Some temporary alleviation of NCC's situation was thus achieved.

With effect from 1 October 1975 the prices for domestic hard coke in the United Kingdom charged by NSF were increased by £, per ton. Increase of £, per ton in NCB's prices for coking coal were also due to take effect on 1 October. On 25 September the Commission informed NCC that NCB was prepared to continue to supply coking coal to NCC at existing prices until 15 October, as a concession, in the expectation that a decision from the Commission would be forthcoming on or before that date. In reply the applicant stressed that this concession, even if made permanently, would not enable the Rotherham and Barnsley plants to remain in operation even on the most optimistic assumptions as to exports of domestic coke and revenue from tar by-products. It further stressed the imminence of a decision to close these plants.

At a meeting held on 15 October with the Commission it was stated to representatives of NCC that the relevant directorate had formed a provisional conclusion that NCB had not misused its dominant position but that no decision had yet been taken or a recommendation made by the Commission in terms of Article 66.

By application registered at the Court of Justice of the Communication on 16 October 1975 NCC sought an order form the Court in the following terms:

1. that the Commission do take a decision in relation to the questions raised by the applicant and/or do make recommendations accordingly;

2. that the Commission do take a decision and/or make a recommendation to the effect that:

   1. NCB has acted contrary to the principles and the provisions of the ECSC Treaty by applying pricing policies contrary to Article 60 and by using its dominant position on the market in domestic hard coke for purposes contrary to Article 66 and to the general objectives of the ECSC Treaty;

   2. that NCB is required to cease and desist from so acting, and

   3. that NCB is required to ensure, whether by lowering the price charged by NCB for coking coal to NCC, or by raising the domestic coke price charged by NSF in the United Kingdom, or both, that production of domestic hard coke for sale in the United Kingdom is economic at the coking coal prices charged by NCB and at domestic coke prices equivalent to those charged by NSF, and

   4. that the British Government has acted contrary to Articles 4, 61, 67 and 86 of the ECSC Treaty by prohibiting NCB from increasing the prices of domestic hard coke in the United Kingdom and from extending ‘the arrangements on rebates’ in respect of the prices of coking coal so as to render them applicable to domestic hard coke exported to the Community, and

   5. that the British Government is required to cease and desist from so acting, and in particular form imposing on NCB policies contrary to the ECSC Treaty or from encouraging it to do so;

3. that the Commission do address such decision, and/or recommendations to NCB and the British Government;

4. that the Commission do pay the costs of these proceedings.

On the same day the applicant NCC lodged with the Court in a separate document an application for interim measures under Article 39 of the ECSC Treaty and Article 83 of the Rules of Procedure. Referring to the urgency of the matter and the irrevokable nature of the damage incurred it requested the Court to order by way of interim measures:

1. That the Commission do forthwith take a decision and/or make a recommendation under which NCB is required to ensure, whether by lowering the price charged by NCB for coking coal to NCC, or by raising the domestic coke price charged by NSF in the United Kingdom, or both, that in respect of the period pending the determination by this Court of NCC's Application under Article 35, NCC is able to continue on an economic basis with the production of domestic hard coke at NCC's Barnsley and Rotherham plants; and that the Commission do address such decision and/or recommendation to NCB.

2. Alternatively that NCB shall forthwith, during the period pending the hearing by this Court of NCC s Application under Article 35, refrain from pricing policies for coking coal and domestic hard coke which have the effect of rendering the production of domestic coke for sale in the United Kingdom uneconomic to NCC.

3. That the Commission do pay the costs of these proceedings.

By letter dated 16 October 1975 bearing the signature Schlieder, the Commission set out its position with regard to the said letter of 21 July 1975 written to the Commission on behalf of the applicant.

The Commission's letter contains the following paragraphs:

‘The Commission accepts that an undertaking which is in a dominant position as regards the production of a raw material (in this case coking coal) and therefore able to control its supply to manufacturers of derivatives (in this case, coke) and which is itself manufacturing the derivatives in competition with its own customers, may abuse its dominant position if it acts in such a way as to eliminate the competition from its customers in the market for the derivatives.

The Commission accepts that in such a situation the enterprise in a dominant position may have an obligation to arrange its prices so as to allow a reasonably efficient manufacturer of the derivatives a margin sufficient to enable it to survive in the long term.

However, it cannot be assumed that these principles apply separately to each different kind of derivative when the enterprise produces several derivatives for which different prices are obtainable.’

In support of this the Commission contends that prices and production costs for domestic coke as part of total coke production cannot be viewed in isolation from prices and costs in the production of other types of coke by the same undertakings, since the production of all types of coke is carried out from the same basic material in the same coke ovens by essentially the same production methods. It points out that the applicant itself varied the output of both its plants in the years from 1971 to 1975 between industrial and domestic coke. It is the fall in demand for industrial coke which has caused the applicant to seek increased sales of domestic coke. Nothing, it is contended, in the Treaty obliges NCB to arrange its prices so as to make domestic coke more profitable when the demand for industrial coke is reduced. NCB found itself in a position, owing to the current competitive conditions in the United Kingdom, in which it would have great difficulty in reducing the price for coking coal used in the production of domestic coke or in raising the price of the end product. Moreover after a consideration of the budget of NSF for the year 1975/76 and its actual costs and income for the months April to July of 1975, the Commission came to the conclusion that it is not impossible to make a reasonable profit as a coke producer, given NCB's pricing policy, in the medium and long term. Accordingly, in the view of the Commission NCB does not have a duty under the Treaty to increase the profit margin on domestic coke to compensate the effects of reduced sales of industrial cokes in times of economic difficulty. The Commission ends its letter as follows: ‘Taking all these circumstances into account the Commission does not consider that NCB has infringed the Treaty’.

By a telex message registered at the Court on 17 October 1975 the Commission mentioned the existence of the letter of 16 October and the possibility of interim measures.

By a telex message registered at the Court on 20 October 1975 NCB requested that it be allowed to intervene in the proceedings, stating its ‘substantial and valid’ interest in the dismissal of NCC's application for the adoption of interim measures and that the judge could not order such measures without NCB's being heard. By a telex message registered at the Court on the same day NCB gave further particulars of its argument. In a second telex message, received on 20 October 1975 it repeated its argument. NCB requests the Court:

1. to grant NCB leave to intervene;

2. to reject NCC's application for interim measures;

3. alternatively, to order NCC to provide security sufficient to cover the losses which would be incurred by NCB if the orders sought are made;

4. to order NCC to pay NCB's costs.

In view of the explanations already given in the course of the narration of the facts the arguments submitted by the parties should now be set out and summarized.

In the first place the parties disagree on the urgency of the measures to be taken and on the inevitable nature of the damage suffered by NCC.

NCC states inter alia that under the new conditions relating to the cost and sales prices of the products in question, that is to say, when the temporary arrangements are suspended after 31 October, the running loss of the two domestic hard coking plants will rise to £559 000 per quarter.

In order to close the plants by 31 October 1975 the final and irreversible run-down must begin on 23 October 1975. The irreversible nature of this process is due to the cooling of the ovens which causes the brick linings to crack and break up. The closure and the loss of these industrial plants will cause an irreparable loss amounting to approximately £4 million. Moreover there will be an inevitable loss of 650 jobs and this will take place in the present difficult conditions obtaining on the employment market.

The Commission, whilst accepting that interim measures are urgently required in order to avoid irreparable damage to NCC, points out that these measures must be taken in favour of all the undertakings engaged in similar activities to those of NCC and that if that is the case, the considerable expense arising from all these measures would have to be borne by NCB.

NCB stresses that NCC had known since approximately 26 September that NCB's undertaking to the Commission would expire on 15 October 1975 and yet NCC only submitted its application on the latter date. Thus NCC has itself created the state of urgency which it pleads in extremis. If the emergency measures sought were applied to all those in a like position to that of NCC, this would cause a loss in revenue to NCB in the sum of £465 000 for every two weeks. For the same period the loss caused to NCC by operating the coke ovens at Rotherham and Barnsley would be less than £30 000.

The parties disagree on whether the judge hearing the proceedings for the adoption of interim measures has the power to order interim measures:

NCC relies on Article 39 of the ECSC Treaty and Article 83 of the Rules of Procedure as giving the Court jurisdiction to order interim measures pending its ruling on the application on the ground of a failure to act which seeks to have established that the Commission wrongfully failed to take action in the face of certain alleged infringements of the Treaty.

The Commission points out that the wording of the provisions relied on enable the Court itself to take ‘any other necessary interim measures’ and it would appear that it can do so in respect of any party, which could include, in the present case, NCB. The Commission would only use its inherent powers to take interim measures, for example under Article 66 (7), if the Court directed it to do so. It leaves this matter to the discretion of the judge hearing the proceedings for the adoption of interim measures. It states, however, that a very strong case would need to be made out in order to justify interim measures involving the dominant undertaking in the costs resulting from such measures. In this connexion it cites a number of previous cases on the subject of interim measures. It declares itself ready to adopt any interim measure ordered by the Court, even in proceedings instituted under Article 35.

NCB states that, since it is not a party to the case, the Court cannot make an order for interim measures against it. The only remedy open to NCC is that under Article 33 of the Treaty, provided that it pleads a misuse of powers. Moreover, the Commission's letter is not a ‘decision’ or recommendation within the meaning of Articles 14 and 15 of the ECSC Treaty. There is nothing which enables the Court to exercise, in lieu and instead of the Commission, any powers whatever, even and above all by way of interim measures, and this so when the Commission itself has not in the first place exercised its power to take a decision. A party to a case cannot obtain by interim measures prescribed by the Court what it could not obtain from the executive at the administrative level. ‘Necessary’ measures are not automatically those desirable for one of the parties. The Commission has found that NCB has not used its dominant position for purposes contrary to the Treaty and has no power to make or permit to be made any interim measures against NCB in respect of lawful conduct. The Commission's only objection relating to the territorial effect of the rebates has already been removed by the solution applied to the problem. Where there is uncertainty as to the economic situation or as to the effects of the interim measures sought, such measures should not be granted.

NCB is not obliged to support alone the loss entailed by the interim measures sought. In particular it is not obliged to suffer the consequences of the delays caused by NCC's failure to react in good time both as regards the taking of procedural steps and from the technological and economic point of view. By a series of concessions NCB has demonstrated its consideration for NCC which still proves to be incapable of taking advantage at the present time of the possibilities open to it of producing metallurgical coke, to offset the losses incurred in producing domestic hard coke, by other production and to reduce its production of domestic hard coke to a minimum in order to save its plant. This is proved by estimates submitted by NCB.

At the hearing on 21 October 1975 the parties presented oral argument and replied to the questions put to them by the judge hearing the proceedings for the adoption of interim measures.