61959C0030
OPINION OF MR ADVOCATE-GENERAL LAGRANGE
DELIVERED ON 5 NOVEMBER 1960 (
1
)
page
I - Facts
II — Procedure and admissibility
A — Intervention
B — Admissibility of the conclusions for annulment
C — Admissibility of the other conclusions of the application
III - Substance
A— Is the shift bonus a subsidy prohibited under Article 4 (c) of the Treaty
1. Interpretation of Article 4 (c)
2. Application to the case
B — Is compensation possible?
Summary of opinion
Mr President, Members of the Court,
I — Facts
As the Court will be aware, these proceedings are the outcome of previous proceedings between the applicant and the High Authority which led to the judgment of the Court of 4 February 1959 rejecting the application as inadmissible.
For an account of the case as it evolved during the first proceedings and the grounds on which the first application was held to be inadmissible, I take the liberty of doing no more than refer to my opinion (the text of which was published in the French edition of the ‘Reports of Cases before the Court’ Volume V, pages 31 to 41, and a translation of which, in the language of the case, was published on pages 31 to 41 of the Dutch edition) and to the judgment (from page 14 onwards of the Dutch edition) which accords in every respect with the opinion.
I shall do no more than remind the Court that, after finding that the High Authority had taken no decision under Article 88 to the effect that the German Government had failed to fulfil one of its obligations (the only decision which the Court could have taken in that case) and that, in consequence, in the absence of a decision, the application was inadmissible under Article 33, the Court similarly rejected the alternative conclusions based on Article 35 on the ground that the procedural requirement in that article (whereby notice must be given to the High Authority to take a decision) had not been fulfilled.
The applicant association followed the implications of the judgment very literally and on 9 March 1959 addressed a letter to the High Authority which, after a brief reference to the argument employed earlier, ended with these words:
‘Pursuant to Article 35 of the ECSC Treaty, we request you, therefore, to record that, in financing the miner's bonus of public funds, the Federal Republic has failed to fulfil one of its obligations under the Treaty’.
On 30 April 1959, the High Authority replied to the applicant rejecting the application, on two grounds:
‘1.
Since the effects of the financing out of public funds of the miner's bonus were “eliminated when the Federal Government suspended payment of a State subsidy permitted under the Treaty and used for miners' old age insurance”, the application of the applicant concerns “a theoretical question concerning the interpretation of Article 4 (c) of the Treaty, and the High Authority cannot consider this question as giving” the association “sufficient legal interest within the meaning of Article 35”.
2.
The High Authority reiterates its conviction that “the situation created by the Government of the Federal Republic is not incompatible with the Treaty so long as the actual conditions laid down in the letter of the High Authority of 21 June 1957 are fulfilled”, which is the situation at the moment. In consequence, a decision cannot validly be taken in respect of the Federal Republic of Germany pursuant to the first paragraph of Article 88 of the Treaty’.
‘The application is therefore dismissed for want of a legally recognized interest and, alternatively, as to its substance.’
The applicant brought an application before the Court which was entered in the Registry on 5 June 1959, and stated:
‘With this application proceedings are instituted against the refusal of the High Authority to take, within the prescribed period, the decision requested by the applicant.’
Clearly, therefore, it is the procedure under Article 35, the only possible one in this case, which is being followed: the fact that the High Authority replied to the notice is irrelevant since it did not take the decision which it was requested to take pursuant to Article 88. As was held in the judgment in Joined Cases 7 and 9/54 of 23 April 1956, to which I referred when giving my first opinion in the present case (rec. 1958-1959, p. 39), it matters little whether the refusal is express or implied.
On 11 December 1959, the Federal Government lodged an application to intervene in support of the conclusions of the defendant High Authority. The intervention was allowed by Order of the Court dated 18 February 1960.
II — Procedure and admissibility
I have first of all to consider certain questions of procedure and admissibility.
A — Intervention
To deal first with the subject of the intervention. This creates a problem because the legal position of the intervener is very different not only from that of the party whose claims it contests, which is normal, but also from that of the party which it has intervened to support: in this case, the defendant.
The High Authority does no more than emphasize the fact, relying on the maxim non tali auxilio but without raising a formal objection to consideration of the intervener's argument.
For its part, the applicant draws attention to Article 93 (5) of the Rules of Procedure under which ‘the intervener must accept the case as he finds it at the time of his intervention’, and contemplates the possibility of a rejection of its own motion by the Court of the main argument in the application to intervene. It states, however, that it would regret this because it would prefer an express decision by the Court covering all aspects of the dispute.
I share the view that the Court should go into the substance of the whole dispute subject, of course, to the question which I shall come to in a moment, whether the application is admissible.
An intervention must be made in support of the conclusions of one of the parties, and this applies here: the Federal Government supports the conclusions of the High Authority that the application should be dismissed.
It is, of course, open to question whether the intervener has a right to introduce submissions (if he is supporting the applicant) or objections (if he supports the defendant) which neither of the main parties had advanced. This question, a delicate one, was explored by my colleague Mr Advocate-General Roemer in his opinion on the intervention of the Government of the Grand Duchy in Joined Cases 7 and 9/54 (Rec. 1955-1956; p. 159, Dutch edition). However, the Court gave no ruling.
In my opinion, the intervener cannot, in principle, introduce a fresh submission or a fresh objection, because the main party must retain control of the proceedings. This is clearly the rule which Article 93 (5) of the Rules of Procedure applies. For example if an intervener made his application to intervene when the written procedure was about to be closed, he could certainly not be allowed to introduce, at that stage, a submission which, because of expiry of the time prescribed, the main party itself was no longer entitled to make. Nevertheless, this does not prevent the introduction of a submission, even a new one, if it relates to public policy, because in such a case the Court must consider it of its own motion. And, in seconding the conclusions of the party which he supports, the intervener is undoubtedly free to submit any argument, relating to the facts as well as to the law, which appear to him to be appropriate even if it departs from or is even opposed to that of the main party: the special interest which he is under an obligation to demonstrate must enable him to present his case independently.
In the present case the intervener supports the conclusions of the defendant for dismissal of the application. It does not raise objections which the defendant has not itself raised. On the substance, it contends, like the defendant, that the High Authority does not have to record, pursuant to Article 88, a failure on the part of the Federal Government in that it continued allocation of a shift bonus which was financed out of public funds. It differs from the High Authority only in taking the view that, in the circumstances in which the shift bonus was established and is allocated, it does not constitute a subsidy prohibited under Article 4 (c), whereas the High Authority while taking the opposite view on this point, recognizes that adequate compensation is possible in law and considers that such compensation actually exists.
Clearly, in order to settle the difference between the applicant and the High Authority, there must be a preliminary decision on the compatibility or otherwise with Article 4 (c) of a shift bonus financed out of public funds. In other words, even if the Federal Government had not intervened, the Court would have had to go into into that question of its own motion; the dispute between the applicant and the High Authority in fact requires a decision on the effect of the prohibition laid down in Article 4 (c) concerning subsidies and on the application of the principle thus brought into play to the facts of the case. A ruling on the question whether and within what limits or under what conditions a ‘prohibited subsidy’ can, in theory, be legally offset is inconceivable except on the basis of first having a clear concept of a ‘subsidy’ within the meaning of Article 4. If consideration of this question were to lead to the conclusion that, in the circumstances in which it was adopted, the measure concerned did not come within the legal definition and did not constitute a prohibited subsidy, it goes without saying that an agreement to the contrary between the parties could not prevent the Court from deducing the consequence of the conclusion which it had thus reached and from substituting this ground for dismissing the application for that relied upon by the defendant. In short, the connections of fact, like the connections in law between the two problems, are too close for them to be separated. This is why, in my opinion, there is no procedural objection to prevent consideration of the substance of the main legal argument chosen by the Federal Government in order to support the High Authority's defence.
B — Admissibility of the conclusions for annulment
I come now to the question whether there exists any absolute bar to proceeding with the case which the High Authority has urged against the application. This will not take long because most of the questions raised in this connection have been settled by previous decisions of the Court.
From these, particularly from the judgment in Joined Cases 7 and 9/54, the first thing which is clear is that proceedings instituted by undertakings or associations of undertakings pursuant to Article 35 must, to be admissible, comply with the rules in Article 33. As regards, in particular, the conditions relating to the general or individual character of the decision, these conditions must be appraised in the light of the decision which, in the applicant's view, the High Authority should have taken, namely, in the present case (as, indeed, in Joined Cases 7 and 9/54), a decision recording failure of a State to fulfil an obligation:
On the other hand, the Court has rejected suggestions made by its Advocates-General, some to the advantage of associations, others to the disadvantage of undertakings, that it is possible to recognize that one and the same decision is a mixed one, either by adopting a comparative criterion — a decision may, for example, be individual as far as an association is concerned and general in the case of an undertaking — or by separating different parts of the decision, in the case, for example, of an enabling decision and the commercial regulations which it authorizes; see, in respect of the first example, the judgment in Fedechar (Case 8/55), and, in respect of the second, the judgment in Nold (Case 18/57). In the present case the contested decision is the refusal to record failure on the part of the Government: this is in the nature of an individual decision.
Finally, it seems to be open to doubt whether the case-law of the Court would also justify recognition in the present case that the decision ‘concerns’ the applicant association.
A decisive development on this point was, in the judgment in Joined Cases 7 and 9/54, the separation of the first part of the sentence in the second paragraph of Article 33, (‘Undertakings or the associations referred to in Article 48 may. . . institute proceedings against decisions or recommendations . . . which are individual in character’) from the words ‘concerning them’.
The process takes place in two stages: it is first established whether, on the facts, the decision is individual in character and then, if it is recognized as having that character, it must be established whether the decision ‘concerns’ the applicant and this must be done on the basis of the concept of legal interest which, although not expressed in the Treaty, is of the essence of an action for annulment as this is understood in the six countries of the Community.
Of course, this does not mean any interest whatsoever; the word ‘concerning’ is strong enough in itself and seems to amount to the ‘direct interest’ which is frequently required under national law. It is for the Court to rule on each case, gradually developing its case-law.
This appears to be developing in a more and more liberal direction: in Joined Cases 7 and 9/54, the interest of the Groupement des Industries Sidérurgiques Luxembourgeoises was manifest and very direct because the result of the contested decision was to impose on undertakings in the group an additional levy of 8 francs on each tonne of coal which they consumed.
In Nold (Case 18/57), the applicant was one of the undertakings subject to the trading regulations whose validity it was challenging; in this respect, the decision authorizing those regulations ‘concerned’ it. Finally, in the judgment in Chambre Syndicale de la Sidérurgie de l'Est de la France et Autres, (Joined Cases 24 and 34/58 of 15 July 1960) the Court held to be admissible proceedings instituted by the applicants against the maintenance of certain special tariffs in Germany favouring the transportation of coal for the coal and steel industry and of which the applicant had not been allowed to avail itself: in the judgment, it was held that ‘the applicants and the German undertakings benefiting from the contested tariff rates are in competition with each other since they carry on the same productive activity in the common market, sell the same products and obtain their supplies of combustile minerals from the same factories; consequently, the contested decision to allow the continuation of reduced tariff rates which could affect this competition concerns the applicant undertakings within the meaning of the second paragraph of Article 33 of the Treaty’.
The present circumstances seem to me to be very similar: the undertakings organized in the applicant association are clearly in competition with the German undertakings who are the subject of the contested measure. If, as is contended by the applicant, the truth of which can only be ascertained by going into the substance of the dispute, the shift bonus constitutes a subsidy intended arbitrarily to prevent the level of German coal prices from following the price on the market, such a situation ‘could affect . . . competition’ (to use the words of the judgment of 15 July 1960), not ‘competition’ in general or in theory but, in very real terms, the competitive situation, whose existence is not in dispute, between the coal-fields of Limbourg and those of Germany.
The High Authority has hinted that the Court might consider the question whether these liberal precedents ought to be qualified in the light of Article 173 of the EEC Treaty. My view is that no useful purpose would be served by so doing. The system adopted in this context by the Treaties of Rome is, in fact, very different from that of the Treaty of Paris; it is in some respects wider, in other respects narrower, which is explained by the wide difference in each case in the basic structure of the relationship between the Community authorities and private individuals. In any event, the judgment of 15 July 1960 makes no step whatever in this direction.
C — Admissibility of the other conclusions in the application
I have also to consider whether there exists any bar to proceedings which the High Authority specially raised against part of the conclusions in the application, namely all the conclusions other than those for annulment of the contested decision. Although this question is of interest only in so far as the application is entertained I shall consider it for convenience at this point. The application claims that the Court should:
‘annul the contested decision;
declare that the High Authority must record a decision that, by financing out of public funds a tax-free bonus granted to miners working underground, the Federal Republic of Germany has failed to fulfil its obligations under the Treaty and that it must accordingly annul this measure;
make any other order which the Court considers necessary’.
The High Authority takes the view that, as this is an application for annulment, the Court can only annul the contested decision, if it sees fit, and nothing else.
This is, in my view, correct; a court ruling on an application for annulment has no power to grant an injunction and cannot put itself in the place of the executive authority which, in the words of Article 34, ‘shall’ by a requirement of law ‘take the necessary steps to comply with the judgment’. To this end the Court may only ‘refer the matter back to the High Authority’. It is true that, under the procedure followed up to the present, the reference back is not the subject of express reference in the operative part of the annulling judgment. But this is unnecessary; the reference back is sufficiently made by service of a judgment of the High Authority as the defendant under Article 64 (2) of the Rules of Procedure.
A partial annulment, whether sectionalized (for example, an annulment of some of the contested provisions) or total (annulment ‘in that…’), is, or course, a difference matter.
Clearly, the legal effects of annulment differ widely from case to case: a judgment can involve a wide variety of different effects from the purely formal one of mere inadequacy of the grounds stated to recognition of a defect of substance which rules out any possibility of taking a similar measure. In the present case, therefore, very careful consideration must be given to the legal situation produced by a judgment of annulment.
As in Joined Cases 7 and 9/54, the subject of the contested decision, express or implied, is the ‘refusal’ of the High Authority ‘to record … in a reasoned decision’ that a Government ‘has failed to fulfil an obligation under this Treaty’.
Does it follow from this that, if the Court annuls a contested decision, the High Authority is, solely on the authority of the decision, bound forthwith and without further enquiry or formality, to ‘record this failure in a reasoned decision’, although the reasons can in any case only be a repetition of the grounds of judgment?
Certainly not in every case. It must be borne in mind that the recording of the failure of a State to fulfil an obligation is the subject of a special provision of the Treaty, namely, Article 88, which has two particular features. The first is the requirement of a preliminary formality: the State concerned must have been given an opportunity to submit its comments. The second is that the Court has unlimited jurisdiction in the proceedings which the State may institute against a decision recording the failure and setting it a time-limit for the fulfilment of its obligation, which means that the High Authority enjoys unrestricted discretion in recording the failure; consequently its powers, like those of the Court, extend beyond the ambit of the proceedings for annulment.
As regards the first point, it is clear that a declaration of annulment on the application of a third party cannot deprive the State of its right to submit its observations. In the present case, however, this can be regarded as unnecessary not only because the Federal Government has intervened in the dispute but also because the procedure laid down under Article 88 has already been completed (on 2 May 1956) and because, since then, the Federal Government has been completely free to submit its observations and has freely done so, as evidenced by the large volume of correspondence which has passed between it and the High Authority.
As regards the second point, it could happen that the recording of the failure was not exclusively based on purely legal considerations; the obligations of the State, particularly those arising, from Article 86, are so defined that any infringement of them cannot necessarily be particularized by the recording of an illegality; one need only call to mind, for example, a breach of the undertaking to ‘take all apropriate measures, whether general or particular … to facilitate the performance of the Community's tasks’. One can therefore perfectly well imagine cases where a third party obtains the annulment of the High Authority's refusal to act under Article 88 on grounds of law which the Court holds to be erroneous despite the fact that the refusal may be justifiable on other considerations of law or of fact.
This is again something which does not apply in the present case. If the applicant's argument were to prevail, it would mean that, since a shift bonus financed out of public funds is per se incompatible with the common market and, accordingly, prohibited under Article 4 (c), compensation being out of the question, its establishment, like its retention, constitutes a failure by the State to fulfil its obligations: in the present case, the obligations contained in the second paragraph of Article 86: ‘Member States undertake to refrain from any measures incompatible with the common market referred to in Articles 1 and 4’. The affect of an annulling judgment must, therefore, be, in the present case, what the applicant is counting upon, namely, an obligation on the High Authority to record the failure, unless of course the Federal Government does not itself forthwith take the necessary steps to make the recording unnecessary.
But whatever the effects of any decision of annulment the Court is not competent of its own motion to express them in the form of injunctions. It is for the executive to appraise its support and to take the necessary steps pursuant to Article 34.
III — Substance
I must now consider the substance.
A logical approach requires that there should first be an answer to the question whether the introduction of a shift bonus, tax free and financed out of public funds, is or is not a ‘subsidy or aid’ prohibited under Article 4 (c). It is on this point, on which the applicant and the High Authority are agreed, that both disagree with the Federal Government. I shall consider at a later stage whether, in the event of rejection of the Federal Government's argument, it is possible in law to recognize that compensation can be made in the form of a new levy imposed on the undertakings and, if the answer is in the affirmative, whether this compensation is, in the present case, full and fair: this is where the applicant disagrees with the High Authority.
A — Is the shift bonus a subsidy prohibited under Article 4 (c) of the Treaty
On the first point I do not propose to repeat all the arguments advanced in support of the two points of view, which were fully developed during the written procedure and so ably elucidated during the oral procedure. I should like first of all just to try to identify the meaning of the prohibiting provisions of Article 4 (c) as they should be interpreted in the light of the other provisions of the Treaty, particularly Article 67. I shall then consider whether the measure taken by the Federal Government is or is not caught by the prohibition.
1. Interpretation of Article 4 (c)
Article 4 reads:
‘The following are recognized as incompatible with the common market for coal and steel and shall accordingly be abolished and prohibited within the Community, as provided in this Treaty:
…
(c)
subsidies or aids granted by States, or special charges imposed by States, in any form whatsoever;
…”
In its judgment in Joined Cases 7 and 9/54, the Court held:
“The provisions of Article 4 are selfsufficient and are directly applicable if they are not repeated elsewhere in the Treaty;
On the other hand, if the provisions of Article 4 are referred to, repeated or subject to regulation in other parts of the Treaty, all passages relating to the said provision must be taken together and simultaneously applied”.
Apart from the transitional provisions, an example of independent application, uninfluenced by any other provisions of the Treaty, is the prohibition of customs duties and quantitative restrictions laid down in Article 4 (a). An example of an application which is simultaneous with other provisions of the Treaty is the prohibition laid down in Article 4 (d) of restrictive practices which tend towards the sharing or exploiting of markets, which prohibition is subject to the rules set out in Article 65. The same applies to the provisions of Article 60 and of Article 70 concerning discrimination in pricing and conditions of carriage in relation to the prohibition laid down in Article 4 (b). In the case of both (b) and (d), the prohibition contained in Article 4 appears to promulgate a principle, the procedure for the application of which is laid down in the special provisions of Title three.
To what extent is this relevant to the prohibition in Article 4 (c) with which we are concerned? Unlike the prohibition of discriminatory pricing or of restrictive practices, it is neither “repeated” nor “the subject of regulation” in other provisions of the Treaty. It is therefore valid in itself.
It is true that other provisions of the Treaty are, in varying degree, closely linked with it. This is true, particularly, in the case of Article 67, for several reasons: first of all, both cases involve action by a Member State; in the second place, again in both cases, the action involves interference with the conditions of competition; and finally, the words “special charges” in Article 67 (3) also appear in Article 4 (c).
Nevertheless, the rules laid down in each case are very different. Whereas Article 4 (c) contains a straightforward prohibition, infringement of which makes the offending State automatically in breach of the Treaty, Article 67, in the first place, refers only to action by a Member State “which is liable to have appreciable repercussions on conditions of competition” (which allows an equally “appreciable” margin of discretion) and, in the second place, empowers the High Authority only to “authorize” or “make a recommendation” and, finally, make the conditions on which the High Authority may act subject to the foreseeable effects of the State's action according to whether the action is liable to increase differences in production costs otherwise than through changes in productivity, or on the other hand, to reduce them. If it reduces them, the effect is not, in principle, liable to distort the functioning of the common market; on the contrary, it promotes it and the High Authority's power to act is limited to cases where there is discrimination to the advantage or disadvantage of the coal or steel industry of the State concerned when compared with other industries in the same country.
Thus the development referred to in Article 4 (c) (subsidies or aids granted by States or special charges imposed by them) appear only as individual cases forming part of a much wider range of actions by the States which are liable to distort the conditions of competition.
Why, therefore, such a different set of rules? There are two reasons and they are closely connected with each other. In the first place, the cases referred to in Article 4 (c) involve direct interventions in the functioning of the common market which are considered to be in themselves contrary to the very conditions on which that common market was established. Because of this they are deemed to be incompatible with it without the need to establish or even to consider whether there is, in actual fact, any interference with the conditions of competition or it is liable to occur; its existence is presumed solely from the purpose of the measure. This is the same principle as that applied, for example, to customs duties: no one asks whether they are a form of protection or are merely fiscal: there is no common market if there are national customs duties. In the same way there is no real common market in an industry straddling several countries if one of those countries subsidizes its own industry; the rules of competition should be evolved only by adapting each industry to the natural conditions, except of course for any necessary transitional measures taken to enable adaptation to be effected without exceptional difficulty, which, as stated in its first paragraph, is the purpose of the Convention on the Transitional Provisions.
The second reason is that everything affecting the working of the common market, both the supervision of the rules which govern it (supervisory action) and action to guide the market and any interventions necessary for this purpose was comprehended in a transfer of jurisdiction to the authorities of the Community, which can, however exercise them only under the conditions and within the limits fixed by the Treaty. The States have lost jurisdiction.
On the other hand, the States retain jurisdiction in other fields (taxation, social security, etc.) as well as in the field of economic policy and social affairs in general. Hence the need for identification of which Article 67 is a major example. The reference to “action by a Member State” in Article 67 must embrace any action in one of those fields where it retains its sovereignty and which may nevertheless produce effects on the conditions of competition in the common market which conflict with the Treaty, but in this case the jurisdiction of the authorities of the Communities is exercised with greater ‘discretion’ so as to ensure that, without impinging on national sovereignty and without prohibiting the measure itself, there is a cessation of effects which conflict with the Treaty.
This leads to the conclusion that Article 4 (c) and Article 67 operate in accordance with very different rules and, although it may have been necessary on occasion to refer to one to clarify the other, this is only, for example, to identify more clearly a common concept such as the concept of ‘special charges’ to which there is a reference in both provisions, in Article 4 (c) and in Article 67 (3). This was what was done in the judgment in Joined Cases 7 and 9/54. It begins by expressly recalling that ‘Article 4 (c) prohibits special charges imposed by States, in any form whatsoever’ and proceeds, with the help of different provisions of the Treaty, especially Article 67, at the end of which the words ‘special charges’ appear, to consider what meaning should be given to these words and concludes by stating that, on the basis of the various criteria which emerged therefrom, the contested measure ‘is not a special charge which is abolished and prohibited by Article 4 (c) of the Treaty’.
After the summary of the legal background to the prohibition contained in Article 4 (c), an attempt must be made to obtain some idea of what is meant by a ‘subsidy’ within the meaning of the provision.
The three parties are agreed that it is difficult to give a precise and unchallengeable definition of the word ‘subsidy’. It is difficult for me, too. It would appear, however, that a fairly clear idea of it may be obtained by taking into account the context which I have just described. Undoubtedly the first essential is to approach the question from, above all, an economic rather than a legal or even financial standpoint. This is indicated by the words ‘aids’ and ‘special charges’ and, obviously, by the very purpose of Article 4 in its entirety, which is to create the conditions for establishment of the common market. Secondly, there is a suggestion of speciality; the words ‘subsidies’ and ‘aids’ are opposed to the words ‘special charges’. The adjective ‘special’ was not attached to the words ‘subsidies or aids’ because its special character is usually of the essence of a subsidy or of an aid, but this is not so in the case of a charge. Thirdly, regard must be paid to the person for whom the subsidy is intended; the beneficiary of a benefit must not be confused with the beneficiary of a subsidy, which might be different. Finally the real purpose of a measure must be examined before its true character can be determined.
The main difficulty identified by the majority of writers and commentators who have studied these questions arises in the case of a measure which, while arising under general legislation covering a field reserved to the jurisdiction of the States (taxation, social legislation, etc.), is nevertheless only concerned with the application of that legislation to the coal or steel industry. The problem receives attention by, in particular, Paul Reuter in No 197 of his work (pages 194 and 195) in a passage which is often quoted. (
2
)
I agree with him that, even when considered de facto and not de jure, the test of speciality is not enough; there can be no doubt that Article 67 was, clearly, drafted with a view to the effect on the common market in coal and steel of the application of general provisions adopted on the subject of, for example, taxation. But, in common with Reuter, I am unable to regard as automatically outside the jurisdiction of Member States everything which, under legislation of this kind, is especially concerned with all or some of the industries of the Community, for example in the form of exemptions or, on the other hand, of particular charges; this would be an unwarranted extension of action by the Community into a field reserved to the jurisdiction of the States. This creates the need for another test to be brought into play, not, as Reuter suggests, the test of intention (according to him, ‘all measures providing for a charge or special privilege adopted with the object of distorting competition’ are prohibited) but, as I have said, a test based on the real purpose of the measure. Thus, the social privileges granted to miners ought not to be regarded as a ‘special charge’ imposed on the mining industry solely because they are not granted to workers in other industries; this is so even though the particular advantages are not of the same type or of the same importance in every country of the Community. As its purpose is a social one, the measure remains within the national jurisdiction and, so far as the Community is concerned, is in principle affected only by Article 67 or Article 68. The same would apply vice-versa if the law were to amend, in favour of undertakings, the method of financing social security, for example, by increasing the proportion of the cost borne by the State. This could not, at least a priori, be regarded as a prohibited aid or subsidy within the meaning of Article 4 (c) because, in the context of general legislation and in the light of the objects which it seeks to achieve, there may be valid reasons for providing special rules for the financing of benefits granted to wageearners in a particular trade.
But the answer would be different if it were to be established that the real object of the measures is economic, not social, and consists either in imposing charges on undertakings which would not normally be placed upon them or, on the other hand, of exempting them from a charge which they would normally have to bear: in that case, if the other conditions, particularly that relating to speciality, are fulfilled, this would involve a prohibited special charge or subsidy within the meaning of Article 4 (c)
2. Application to the case
I must now apply these principles in the case of the shift bonus.
This is an allowance, free ot tax and of any deduction for social security purposes, paid by the undertakings to miners working underground and levied on the amount of tax collected from wages by deduction at source.
The total of the amounts paid by way of shift bonus is produced, therefore, by deduction of the amounts owed by the undertakings to the State, which in fact means, as the parties agree, that the shift bonus is a benefit paid by the State to underground workers. It is the subject of a special law.
Prima facie, there can, in my opinion, be no doubt that this is additional pay, a constituent part of the emoluments. The bonus is in fact paid on the basis of the work performed by the recipient; it is the consideration for the services which he renders.
But is it nevertheless, as far as the undertaking is concerned, a subsidy because the cost is not borne by the undertaking?
The answer depends wholly on the real purpose of the bonus. If it is purely social in character and bears no relationship to the proportion of production costs charged to labour, the answer must be no: that would be a ‘social wage’ to which I have referred.
On the other hand, if it is designed to offset part of the wage bill to be paid by the undertaking, then it is a subsidy.
But if we go back to the time when consideration was being given to the introduction of the shift bonus in February 1956, what do we find? The demand for coal was still very strong. Greater attention than ever was being paid to developing production and, even more, to improving productivity at a time when there was growing and disturbing discontent with the life of a miner, accompanied by absenteeism and considerable wastage of skilled labour, which was increasingly difficult to replace — developments which, incidentally, were not peculiar to the German mines. On the other hand, the system of maximum prices was due to end on 31 March and the High Authority has no intention of reviving it, while the association of producers of the Ruhr and the trade unions had announced the need to raise wages by an average of 9 % with effect from 15 February ‘in order to prevent the threatened departure of mineworkers to other industries’, which would entail an average rise in the price of coal of DM 3 per tonne. A further increase of DM 3 per tonne also appeared necessary to the producers ‘in order to wipe out a longstanding deficit’.
This situation was brought officially to the notice of the High Authority by a letter from the Federal [State] Secretary for Economic Affairs dated 4 February 1956 in which it was stated that consideration was being given to a number of measures the main purpose of which was to reduce the undertakings' costs ‘with a view to keeping this increase in price within comparatively narrow limits’, which was liable to have ‘unfortunate consequences for the entire price structure, more particularly in the Federal Republic, but also in other countries of the Community whose consumers are dependent on coal from the Ruhr’. Among these measures was the shift bonus which, according to the letter, ‘while involving no direct financial relief for the undertakings does seem likely to make working underground especially attractive and in this way to offset threatened departures and to stimulate urgently needed recruitment of new workers in the coalfields’.
In these circumstances I find it impossible to avoid the conclusion that we are really dealing with the assumption of responsibility by the State for a salary payment which is normally borne by the undertakings and, consequently, with a subsidy granted to the latter with a view to avoiding or at least limiting the resultant increase in prices.
This does not mean to say that the object of the subsidy is to protect the industry concerned or to encourage its development: that is not necessarily the object of a subsidy. It can also, as in the present case, be intended to prevent a price increase, in the interests of the consumer; it is then a price subsidy.
This does not make it any less incompatible with the Treaty, since it directly impinges on the powers of the Community institutions. Undoubtedly, action affecting the prices of coal and steel, more particularly perhaps that of coal, also affects the general economy of Member States and this is why, in this field as in others, the High Authority must always act in conjunction with the Council; it is, accordingly, obliged to consult the Council before fixing maximum prices (Article 61) but it must take action only as part of the exercise of the powers conferred by the Treaty on the institutions of the Community and not by way of unilateral action by a Member State.
It was, of course, urged that there are considerable differences between the miner's bonus, as it was established, and any pay increase which the undertakings conceded. These differences arise primarily as a result of the very special conditions on which the bonus is awarded since it is free of tax and of any deduction for social insurance pur poses. This, we have been informed, was the only way of giving it its true character, namely, that a privilege granted exclusively on account of the underground worker's value without the individual amount of the bonus being affected by the family circumstances or tax position of the person concerned, as earnings necessarily are. Emphasis has also been laid on the psychological effects produced by the concession of this special privilege by the State, which gives the bonus the character of a mark of national recognition and of a public tribute to the exercise of a trade whose importance to the Community is equalled by its unpleasantness.
The first consideration ought not, in my view, to be taken into account. The legislature was well within its rights to prescribe special rules for the award of the bonus, such as those making it free of tax and of social insurance deductions. So far as the employer is concerned, this does not change its character, which is that of a routine item on his wage bill. As I have said, the economic aspect is the decisive one here. Whatever the conditions for award of the bonus, it remains an item of the production costs and of that part of the production costs which covers the worker's remuneration for his work and which is paid by the employer. If the shift bonus had not been introduced, the undertakings could, to prevent the drain of labour which they were experiencing, have themselves granted special privileges to their underground labour force. We were told that there was no connexion between the introduction of the shift bonus and the proposals for wage increases which were being considered at that time, but the evidence seems to indicate the contrary.
The second consideration, which concerns the psychological effect of a bonus granted by the State, is, of course, much more to the point. It certainly seems to have impressed the High Authority, if one may judge by the letter of 17 January 1957 in which, in deference to this argument, it declares, apparently for the first time, that it attaches no importance ‘to the form of the measures adopted’ and is satisfied if the compensation is adequate. In my view, however, the argument is by no means decisive. In fact what matters is the practical outcome and not the methods of payment. It would have been easy, for example, to provide for the undertakings to reimburse public funds for the expenditure which they authorized for payment of the bonus, as had indeed been suggested by the High Authority in the penultimate paragraph of the letter of 17 January 1957, to which I have just referred; this solution was obviously a very different one from that finally adopted by the High Authority and which enabled compensation to be made by a charge of another kind. Again, it is conceivable that payment of the bonus could have been written into the Law. It would have mattered little so long as the actual cost of the payment was borne by the undertakings.
But, it may be asked, would there then not have been a ‘special charge’ which is just as much prohibited as a subsidy? No, not if, as I hope I have shown, it was, in the circumstances, a question of an item of the wage bill which is normally borne by the employer; nothing more was involved that the action of a State in the exercise of the powers which it retains on the subject of pay under Article 68 (1).
To sum up, I am firmly of the view that, in the circumstances in which it was established, the shift bonus financed out of public funds was undoubtedly a subsidy which was intended to prevent a concomitant increase in prices by providing for the State to take over part of the production costs borne by the undertakings.
Nevertheless, a further objection can be raised. In view of the changed economic situation, is what was true at the time still true today? At a time when a reduction by 83000 in the number of underground workers is regarded as cause for congratulation, is there the same need as there was in 1956 at all costs to halt the departure of labour from the mines? Because of this, has the bonus ceased to be a subsidy?
I think not. Once such a privilege is granted it is difficult for it to be withdrawn. In the first place, the bonus is the objective reflec tion of certain specific characteristics of the job and it is usual for the worker's remuneration to take account of them, regardless of the level of employment: this is an ethical consideration which cannot be divorced from the concept of pay (pay being the fair reward for services rendered). Moreover, in the present crisis, there is even greater need to employ specialist labour, an essential condition for an improvement in output, so that the need to reduce the number of mineworkers is no reason at all for reducing or abolishing the addition to pay associated with the special conditions of employment applicable to some of their number.
There remains, finally, the argument based on the lack of speciality in the measure in that the shift bonus is available to all underground workers and not only those who work in the coal-mines.
In my view this argument is without substance. It is of course true that, out of considerations of equity, the shift bonus, originally granted only to miners in the coal-fields, was very soon extended to cover their fellow-workers in the iron-fields, potassium mines and so on. But according to the figures supplied by the intervener itself, there are, in the Federal Republic, only 44000 underground miners working in mines other than the coal-mines, compared with 340000 working in the latter. We saw that the real object of the establishment of a shift bonus financied by the State was connected with the situation in the coalmines; there is no doubt that it constitutes a subsidy granted to the German coal industry.
Two further comments in conclusion.
The first concerns Article 92 of the EEC Treaty, to which reference has been made by way of analogy. This argument is a misleading one. In the first place, while it is true that Article 92 of the EEC Treaty refers only to any aid which distorts or threatens to distort competition, thus linking the two concepts, this is precisely what Article 4 (c) of the ECSC Treaty does not do: I have already covered this point. In the second place, close study of Article 92 as a whole leads to the conclusion that, in the circumstances in which it was established, a shift bonus financed out of public funds would not, under the EEC Treaty, be considered to be compatible with the common market either on the basis of paragraph 2 or of paragraph 3 of Article 92 and that, on the contrary, it must be regarded as incompatible under Article 92 (1).
As my second comment, I must draw attention, rather in the spirit in which Steindorff did so in a study published in the Berichte der Deutschen Gesellschaft für Völkerrecht for the year 1957, at page 96, to the serious difficulties which could arise from a system of interpretation based on too close an interrelationship between Article 4 (c) and Article 67. The Court will be aware, as I have had occasion to recall, that Article 67 draws a distinction according to whether interference with conditions of competition have the effect of reducing or, on the other hand, increasing differences in production costs; in the first place, no action is, in principle, called for unless there is distortion in comparison with the other industries in the same country (paragraph 3). In the second case, the latter condition is, on the other hand, not required before action can be taken by the High Authority. It may follow from this that, if the High Authority reached the conclusion that the shift bonus was liable to constitute appreciable interference with the conditions of competition such as to provoke a serious disequilibrium (which cannot be, a priori, ruled out) the second paragraph of Article 67 (2) would apply; this is because it is generally considered that the production cost of German coal is lower than that for coal in other countries of the Community. Accordingly, a measure such as the shift bonus increases differences in production costs. On the other hand, if the same measure was applied in another country, it would reduce this difference in production costs and Article 67 (3) alone would apply, which could lead to widely different decisions both on the question whether actions should be taken and on the question what it should be. One must recognize that these subtleties may be more than justified from the point of view of economic theory but that they would be unlikely to find general acceptance; few would understand why the same measures, such as a shift bonus, adopted under the same conditions, could be lawful, in for example, the Netherlands and unlawful in Germany simply on the ground that in one case it ‘increases’ while in the other it ‘reduces’ differences in production costs.
This fully confirms the wisdom of the difference in legislative control established between direct measures (aids, subsidies and special charges) and the more or less indirect effects of measures adopted as part of general legislation, because, as the present dispute shows only too clearly, there could always be endless discussion on the existence, nature and importance of such effects. There can be no doubt that the way in which the prohibitions in Article 4 have been, if I may say so, ‘sucked down’ into the ‘quicksands’ of Article 67 must constitute appreciable if not serious interference with the proper functioning of the common market which the Treaty sought to attain.
B — Is compensation possible?
I need not dwell on the second point because, in my view, the conclusions I have reached on the first point already indicate that the High Authority's plea on the possibility of a set-off should be rejected.
In my opinion, the fundamental differences of system between Article 4 and Article 67 shows that the possibility does not exist. If this is really a case of an aid or subsidy under Article 4, it is purely and simply prohibited, which means that the State has no right to introduce it and, if it has done so, even in good faith, the duty of the High Authority is to find ways and means of having it abolished. Apart from the difficulty, often considerable, in judging whether the contemplated counter-measure is really a charge, and whether, in respect of the same parties (the undertakings), it really and fully succeeds in counteracting the effect of the ‘prohibited’ subsidy (questions which can give rise to much discussion and debate), there is always the danger that the ‘countermeasure’ may be cancelled or replaced by another the actual effect of which will require fresh investigation. Meanwhile, although the subsidy itself is prohibited, it remains, together with its effects. As the applicant stated, in that event the concept of compensation for damage replaces the concept of prohibition.
In these circumstances, I regard it as unnecessary to determine whether, in the present case, the compensation accepted by the High Authority is genuine and adequate. My only comment is that I very much doubt it.
Viewed as compensation, namely, as a new charge imposed on undertakings and equivalent to the charge constituted by the shift bonus, the measure consists in the restoration of a proportion (6-5 %) of the percentage contribution made by the undertakings to the miners' old age insurance, which was the share which the State took over when the shift bonus was established.
The first question which arises, and which was asked by the applicant, is whether this is not quite simply a case of the abolition of a measure which was itself also a subsidy. The amount of the employer's contribution in the mining industry was fixed at 14-5 % and its reduction to 8 % constituted one of the measures adopted by the Government to alleviate the financial burden on undertakings and, as expressly stated in paragraph 3 of the letter of 4 February 1956, ‘partly to offset the effect of an increase in the price of coal’. Was it nevertheless a routine measure adopted under provisions relating to the financing of social security and, as such, not a subsidy but subject to Articles 67 and 68 (5)? This is what the Federal Government argued and the High Authority accepted on the ground that the measure merely consisted of restoring the level of employer's contribution to 8 %, which is the level usually applicable in other industries. There is, however, still room for doubt when one bears in mind that, at the time, the social security scheme for miners had been approved and that contributions had been substantially increased, with the result that the State's share of their cost had reached a very high level. From the point of view of social security, it was clearly the wrong moment to choose at which to reduce the employer's contribution by aligning it with that in other industries and thus to make the State's share even greater. Was it not rather a case of an act of expediency, the real purpose of which was to provide an ‘aid’ for the mining industry? The question can at least be asked.
But it is unnecessary to answer it in the present case. A choice must be made between two alternatives: either it was a subsidy, and there can be no question of the abolition of one prohibited subsidy being able to justify the continuance of another prohibited subsidy or, alternatively, it is merely a change in the application of social security legislation which does no more than re-impose a previous obligation and I cannot see how such a measure could constitute a fresh charge specially imposed upon undertakings in order to counteract the effects of the prohibited subsidy.
Summary of opinion
I am of the opinion that:
—
the contested decision should be annulled;
—
the other conclusions in the application should be dismissed; and
—
that half the costs should be borne by the High Authority and half by the Government of the Federal Republic.
(
1
)	Translated from the French.
(
2
)	La Communauté européenne du charbon et de l'acier, Paris 1953.