61957C0013
OPINION OF MR ADVOCATE-GENERAL LAGRANGE
DELIVERED ON 18 MARCH 1958 (
1
)
Contents
I — Background
II — Analysis of Decision No 2/57 of 26 January 1957
III — Conclusions and submissions
IV — The powers conferred upon the High Authority under Article 53(b)
(a) The ‘financial arrangements’
(b) The conditions for the exercise of the powers provided for in Article 53 (b)
with regard to form
with regard to the objectives
with regard to the limits set by Article 4 of the Treaty
with regard to the limits set by specific provisions of the Treaty
with regard to the priority of interventions
V — Application to the present case
(a) ‘Necessary’ nature of the graduation of the financing of equalization
(b) The objectives of the decision and the observance of the limits of Article 4
with regard to the objectives of Article 3 (a), (d) and (g)
with regard to Article 3 (b) and Article 4 (b)
(c) Observance of the limits set by the specific provisions in the Treaty
with regard to Article 59
with regard to Article 54
(d) Summary of observations on the substance
(e) Procedure and admissibility
Misuse of powers
with regard to the provisions alleged to have been disregarded
with regard to the status of the applicants
Specific questions relating to Case 13/57
(f) Final opinion
Mr President,
Members of the Court,
I consider it essential before starting to consider the application, and indeed to make it easier, to go over in some detail the steps taken by the High Authority in connexion with the problem of ferrous scrap up to the adoption of Decision No 2/57, the true nature of which will perhaps be seen more clearly in the light of what has gone before. Immediately prior to the establishment of the Common Market supplies of ferrous scrap were obtained in ways which differed greatly from country to country, owing to the individual nature of the earlier evolution of each steel industry. France, Germany and the Netherlands met their requirements and indeed exported a certain quantity of scrap whilst Belgium and Italy resorted to imports, Italy importing 637000 metric tons in 1952, two-thirds of its purchases coming from third countries. Thus it was already clear that the Community as a whole was going to suffer from a shortage of scrap. This was all the more disturbing since recourse to imports presents two major problems: first supplies are not assured because the world consumption of ferrous scrap is constantly increasing and the ‘export surpluses’ of exporting countries such as the United States are variable in the extreme, not only as a result of market forces, but also of economic policies and indeed of politics as such, and are thus liable purely and simply to run out. Thus part of the exports of ferrous scrap from the United States is reserved for the Japanese steel industry at different prices from those asked from Europe. There is thus in fact no real international market in ferrous scrap with world rates determined by supply and demand, such as, for example, in the case of copper. The second reason is the considerable difference between the import prices and domestic prices, at any rate when the market is buoyant or steady.
This is why the High Authority was induced to adopt at the beginning of 1953 certain measures designed to prevent prices in the Common Market from aligning with external prices and also to prevent the formation of irregular patterns of trade between the various parts of the Community. Accordingly by Decision No 2/53 of 7 February 1953 the High Authority for a brief period, which expired on 15 March 1953, allocated ferrous scrap amongst the countries of the Community: it allocated the resources of ferrous scrap of each Member country to that country albeit authorizing the export to Italy of 5000 metric tons of German scrap and 20000 metric tons of French scrap. The statement of reasons in the preamble to the decision indicates the High Authority's intentions at this early stage, and it has never subsequently deviated from them:
‘Whereas the difference in price between ferrous scrap recovered within the Community and scrap imported from third countries seems likely to cause serious difficulties in supply to the iron and steel industries until such time as an equalization scheme, designed to meet such a situation, can come into operation …’
By Decision No 28/53 of 13 March 1953, adopted under Article 61 of the Treaty, the High Authority fixed maximum buying prices for ferrous scrap, with abatements fixed by zones in order to take account of the distance between centres where the scrap was recovered and the places where it was consumed. It provided for the reduction of those prices by 3 units of account from 15 June 1953 in order to prevent speculators accumulating stocks. The scrap was divided into five different categories which were themselves subdivided into classes each of which was subject to a different price.
At the same time the steel industries of the six countries introduced the equalization scheme which had been previously announced. By a notarial act drawn up in Brussels on 24 April they simultaneously established the Office commun des consommateurs de ferrailles (the Joint Bureau of Ferrous Scrap Consumers (hereinafter referred to as ‘the OCCF’)) and the Caisse de péréquation des ferrailles importées (the Imported Ferrous Scrap Equalization Fund (hereinafter referred to as ‘the CPFI’)), cooperative associations governed by Belgian law whose purpose was to consider solutions which might resolve all problems concerning the supply of ferrous scrap to the Common Market. As its name suggests the CPFI is more particularly required to ‘equalize the prices of scrap imported from third countries with the prices of scrap coming from the Community territories’ in accordance with the procedures contained in ‘regulations adopted by the Council’. It should be noted that statutes of both the OCCF and the CPFI made provision for the presence at all meetings of the Council of ‘an observer from the High Authority’, but it was stated that this observer should ‘have no right to speak or vote …’. This right was afterwards conferred by an amendment to the statutes which was enacted a year later. Those agreements were recognized as compatible with the provisions of Article 65 of ther Treaty and considered to be capable of remedying the lack of ferrous scrap on the market by adequate imports and the distribution of the tonnages thus acquired ‘at prices comparable with those prevailing within the maximum prices fixed by the High Authority’, and were thus authorized, on the basis of Article 53 (a) of the Treaty, by Decision No 33/53 of 19 May 1953. In the preamble the High Authority noted
‘the establishment of a fund for the equalization of imported ferrous scrap is necessary to ensure a regular supply to the Common Market and to ensure that all comparably placed consumers in the Community have equal access to their requirements of ferrous scrap, whether it be recovered within the Community or imported from third countries’.
The decision subjected the institutions so empowered to certain checks, and required in particular that the High Authority must approve in advance rules formulated by the management to establish the procedures for equalization.
Parallel with this, the High Authority required the winding up or reorganization of all offices or other institutions previously set up in the Member States for allocating scrap or regulating scrap prices, in particular the German ‘Schrottvermittlung’, the Italian ‘Campsider’ and the French ‘Union des Consommateurs de Ferraille Française’.
At the end of 1953 the fall in the demand for ferrous scrap as a result of a reduction in iron and steel production led the High Authority to adjust its system of prices to the situation actually existing on the market and to order a fresh reduction of $3 in the prices prevailing on 15 June. Since world prices were much higher than those in the Community, the High Authority, in order to prevent this reduction from giving rise to a large volume of exports, called on the governments of the Member States to limit exports of ferrous scrap to third countries. Since the Community thus retained ‘its’ scrap it was able whilst the market was weak to reduce its purchases of scrap from third countries to a very low level. It was not until the fourth quarter of 1954 that, following a distinct upturn in the steel trade the Community had again to have recourse to supplies from abroad (imports in 1954: 118000 metric tons for the first three quarters; 565000 metric tons for the last quarter alone) (Troisième Rapport Genéral sur l'Activité de la Communauté, 10 April 1955, page 87).
Would the fact that the market in scrap had thus become easier at the beginning of 1954 render superfluous the equalization scheme authorized a year earlier and would it lead the High Authority to suspend all interference with the free play of supply and demand? Nothing of the sort. Equalization had in fact proved to be a kind of mutual insurance scheme capable of guaranteeing to each scrap consumer a reasonable and comparable supply price and of avoiding on the market ‘sudden periodic fluctuations in price on a scale similar to that experienced in the past’ (Deuxième Rapport Général sur l'Activité de la Communauté, 11 April 1954, No 75, page 104). One of the distinguished lawyers representing the applicants took this view and stated that ‘the establishment of an equalization scheme was necessary from the outset in order to avoid the abuses of unrestricted competition … either with regard to purchases from foreign countries or to distribution within the countries of the Community’.
The examination of the situation which the High Authority undertook in March 1954 led it to plan the abolition of the system of maximum prices which would at the same time have done away with the disadvantages arising from the rigid system of distinctions between zones and, by making the equalization scheme compulsory, to apply it universally, with the shared costs of importing scrap ‘remaining the essential factor in the stability of the Common Market’ (Deuxième Rapport Général).
This reform was contained on the one hand in Decision No 21/54 of 26 March 1954 which repealed the system of maximum prices and, on the other, in Decision No 22/54 of the same date which established, this time on the basis of Article 53 (b) of the Treaty, a financial arrangement ‘for the equalization of ferrous scrap imported from third countries’.
The justification for extending the scheme to consumers of ferrous scrap as a whole, which was requested by the majority of those concerned, lay in the equalization of prices which would result:
The High Authority stated: ‘whereas all consumers of bought ferrous scrap in the Community will benefit from an equalization scheme and it is fair that all those consumers should contribute to the expense thereof…’.
Nevertheless after the middle of 1954 when steel production again revived it rapidly became clear that with the problem of prices came a problem of quantity which was infinitely more disturbing. Two figures are sufficient to indicate the extent of the problem: imports of ferrous scrap rose from 683000 metric tons in 1954 to 2952000 metric tons for 1955. The High Authority was not just confronted with the task of balancing foreign prices with those prevailing in the Common Market: thereafter it was concerned to ensure that the extraordinary expansion of production which was taking place was not sooner or later held in check through one of the raw materials essential to the steel industry becoming scarce.
Consequently the High Authority applied the powers which the Treaty conferred upon it in order to solve this problem and directed its policies towards an objective which, in its view, had to be attained if the development of steel industry was not to be compromised: the reduction in the total specific input reference for ferrous scrap which it regarded as an essential condition for the maintenance of the expansion of steel production.
These concerns are reflected in all the documents published on this topic at the time. Thus the memorandum on the general objectives of July 1955(JO No 16 of 19.7.1955, p. 825) reads:
‘If steel production relies too much on the use of ferrous scrap there is a risk that its expansion will be restricted because the recovery of scrap is largely dependent upon steel consumed long ago.
…
In the present state of production it is necessary in order to avoid a permanent shortage of scrap to ensure a proper balance between production capacities in basic Bessemer steel, open-hearth (Martin) steel and electric steel. The introduction of new technical processes for basic Bessemer steel … will improve the quality which constitutes a necessary condition for its substitution for open-hearth (Martin) steel for certain purposes. Such a development must be favoured in view of the fact that resources of ferrous scrap will be relatively limited in future.
The alternative is to increase the specific input reference of pig-iron for the production of open-hearth (Martin) steel.
…
The development of electric steels and special steels reduces the relative quantity of pig-iron … If account is taken of the fact that the significantly increasing production of electric steel is based almost entirely on ferrous scrap and that, on the other hand, the increasing difficulties in the supply of ferrous scrap require a corresponding increase in the use of steel-making pig-iron and spiegeleisen in open-hearth (Martin) furnaces and, in any case, that Bessemer steelworks should be fully supplied with basic Bessemer pig-iron, it is clearly essential to ensure a sufficient increase in the production of pig-iron …
…
Parallel with this development it will be necessary to ensure a balance of prices which will permit increased use of pig-iron as opposed to scrap in the manufacture of steel.’
The Troisième Rapport Général sur l'Activité de la Communauté, published on 10 April 1955, is even more conclusive and shows that, in addition to measures merely equalizing the prices of imported ferrous scrap the High Authority, with the agreement of the Council of Ministers, intended in future to adopt such economy and selective measures as the situation appeared to it to require. The ‘six principles’ adopted by mutual agreement by the Council of Ministers and the High Authority in the course of the meeting held by the Council on 21 and 22 March 1955 constitutes the culmination of the work carried out in conjunction with experts and forms the basis of the general policy which the High Authority was to adopt in future. I should like to remind you of the wording of those principles:
‘1.
The level of buying prices must be sufficient to maintain a high level of recoveries.
2.
The cost of scrap to steel producers, namely the sum of the purchase price and the equalization charge, must not exceed what is reasonable in comparison with the amount actually paid by steel producers in the principal competitor countries.
3.
In order to avoid excessive increases in cost prices in the Community as a whole, particularly the net charge borne through the operation of the CPFI by certain areas of the Community, equalization levies must not be increased without very good reason.
4.
Encouragement of imports and of a reasonable level of prices must not stimulate, either in existing plant or by the establishment of new plant, an excessive increase in the consumption of ferrous scrap.
5.
Facilities granted for imports must not provide an incentive in any country for the relaxation of efforts to recover domestic scrap.
6.
All endeavours must be directed to reducing the consumption of ferrous scrap through the increased use of pig-iron, so far as this is technically and economically possible and other raw materials are available (Troisième Rapport Général, p. 105).’
Those aims gave rise to the reorganization of the equalization scheme which was embodied in Decision No 14/55 of 26 March 1955. The scheme now had a three-fold objective.
First the institutions in Brussels were confirmed in their task of ensuring the equalization of the prices of ferrous scrap imported from third countries and the prices of scrap recovered within the Common Market.
Secondly, the OCCF was empowered ‘to conclude purchase contracts directly on behalf of consumers to be designated later’ in order, as we learn from the statement of reasons, ‘to enable a certain tonnage of immediately available imported ferrous scrap to be held back temporarily to cover deficiencies … arising from the discrepancy between the estimates and actual purchases in the Common Market’. Subparagraph (b) of the first paragraph of Article 5 of the decision states in this connexion that the OCCF may propose to the CPFI:
‘the conditions to which the benefit of compensation is subject, in particular the use in certain areas of the Community of imported or similarly acquired ferrous scrap, in accordance with overall estimates, corrected at regular intervals in relation to the supply situation in different parts of the Community’.
This article also provides that in all this account must be taken of the following, in descending order of priority: (a) covering current consumption requirements; (b) the correction of discrepancies noted between estimates and deliveries; (c) building up of stocks.
Finally the institutions in Brussels were requested to formulate detailed rules as to compensation intended to promote the substitution of pig-iron for ferrous scrap in the production of steel, in the form of bonuses granted during the period in which the decision was in force ‘in respect of economies in ferrous scrap effected by the increased consumption of pig-iron’ (subparagraph (c) of the first paragraph of Article 2; subparagraph (e) and (f) of the first paragraph of Article 5).
In addition the decision reinforces the High Authority's control over the operation of the scheme, through means which I consider it pointless to discuss in detail at present. The detailed rules of the pig-iron and scrap compensation system newly laid down under the equalization scheme were to be the subject of two decisions adopted after technical studies; these were Decision No 26/55 of 20 July 1955 and Decision No 3/56 of 15 February 1956 upon which I wish to dwell a little.
The former decision confers entitlement to bonuses upon undertakings which effect economies in ferrous scrap through the increased use in open-hearth (Martin) furnaces of pig-iron originating in the Community. The latter decision extends entitlement to bonuses in respect of economies in ferrous scrap effected through an increased input of liquid Bessemer steel in electric furnaces. The bonuses thus granted are essentially calculated on the basis of the increase in the specific input reference of pig-iron or of liquid steel in relation to the specific input reference for a reference period which was defined by the High Authority itself in the decision (the fourth quarter of 1954). The rate of the bonuses was prescribed in accordance with somewhat complex rules. It is important to note that Article 5 of Decision No 26/55 lays down in principle that the fixing of the bonuses is to be determined ‘in relation to the disadvantages caused by the substitution of pig-iron for scrap in open-hearth (Martin) furnaces’, which shows that the authors of the scheme intended to provide approximate compensation for production costs which would be such as to encourage the substitution of pig-iron or liquid steel for ferrous scrap, thereby protecting the undertakings against excessive financial sacrifices. Finally it is still more important to note that the financial burden of this scheme of compensation was to be borne by consumers of bought scrap as a whole. The bonuses were in fact payable ‘from the resources of the CPFI’ and, whilst they were maintained by the revenue from a special contribution in addition to equalization properly so-called, it none the less remains true that consumers of bought scrap as a whole were required to pay this special contribution, both those who for technical reasons are not entitled to the bonuses and those who, since they operate open-hearth (Martin) furnaces or liquid-charged electric furnaces, might have been entitled to benefit under the scheme.
This shows that the financial arrangement in Decision No 14/55 must be considered as a coherent entity and not as the conjunction of two separate arrangements, as the objective justification for imposing the supplementary contribution relating to the pig-iron and scrap equalization, even with regard to undertakings which are not technically capable of benefiting from the bonuses, lies in the fact that the substitution of pig-iron for scrap in the plants where this is possible is capable of benefiting scrap consumers as a whole. In fact the idea is that the incentive to substitute pig-iron for ferrous scrap must entail a relative fall in the demand for and thereby in the price of this material which has become scarce, to the benefit of all purchasers.
However it must be said that the High Authority did not appear to expect that the operation of this arrangement alone would restore a situation which it considered alarming. When Decision No 14/55 was published it was accompanied by a declaration issued by the High Authority at the time of the meeting of the Council of 21 and 22 March 1955 and making future developments dependent on the results which the system might produce:
‘… if, in the light of experience, the level of prices on the Common Market and the functioning of the arrangement do not correspond with the principles with which the High Authority has expressed its agreement with the Council, or if developments, at present unforeseen, occasion considerable alterations in the conditions of supply, the High Authority will notify the Council of this situation as quickly as possible and will discuss with it the measures it proposes to adopt in order to cope with the situation …’ (JO No 8 of 30.3.1955, p. 688).
In fact, although the measures enacted for the compensation scheme for pig-iron and scrap actually ‘equalized’1600000 metric tons through bonuses, they had by no means made good the additional demand for ferrous scrap caused by the expansion in the steel industry which the Community had been experiencing since 1954, in particular with regard to production based on ferrous scrap. Furthermore the policy of guiding investments towards the expanded production of ferrous scrap could not produce results for several years and this circumstance clearly required steps to be taken to prevent the deficiency in ferrous scrap from worsening during this difficult period. Throughout 1956 the High Authority publicized the need to reorganize the market in ferrous scrap. Accordingly, when it decided on a first extension of the scheme, by Decision No 10/56 of 7 March 1956 it stated:
‘Whereas it appears necessary to review the scheme presently in force to make use of the experience gained;
Whereas the detailed studies for a new scheme cannot be completed by 31 March 1956 and it is thus clearly necessary to extend by three months the period of validity of the abovementioned decisions…’
Likewise, when it published its three-monthly estimates, it declared with regard to ferrous scrap:
‘Having regard to difficulties concerning imports it is necessary to reduce stocks and measures for conserving ferrous scrap are urgent.’ (JO No 10 of 30.4.1956, p. 127).
When the High Authority directs a solemn warning concerning the guidance of investment programmes in the steel industry and, taking account ‘of the seriousness of the problem of supplies of ferrous scrap and of the need to try to develop steel production through the production of pig-iron’,
‘it urgently impresses upon steel undertakings that they must treat as a matter of priority a balanced development of productive capacities of pig-iron and of steel in their investment plans …’ (Avis General published in the JO No 17 of 19.7.1956, p. 210).
The situation at the end of 1956 was marked by a new increase in imports (3200000 metric tons, which constituted an increase of 8 % over the previous year) by relative stagnation in domestic recovery of scrap (up 1.5 % on 1955 despite an increase of the price in scrap amounting to as much as 100 % in relation to 1954 in certain retrieval centres in the Common Market) and by a slight increase in the specific input reference of scrap per metric ton of steel produced. When the market is buoyant recourse to ferrous scrap is in fact an easy means of expanding production.
These are the circumstances which, after long discussions, finally led, as the Court knows, to the journey to the United States of the Director of the Market Division and to the work of reorganizing the market in ferrous scrap which the High Authority undertook 18 months ago: that work terminated with the adoption of Decision No 2/57, the general plan of which must now be outlined.
The objectives of the decision are first of all clearly set out in the first three recitals in the preamble to the decision, and I should now like to bring them to the notice of the Court:
‘Whereas the situation of the market in ferrous scrap continues to make it necessary to import ferrous scrap from third countries and to use scrap from ship-breaking and other salvage work of a difficult nature, and to apply price equalization to such scrap in order to ensure regular supplies at a reasonable price.
Whereas for this purpose it is necessary to maintain the system introduced by Decision No 14 of joint purchases from third countries and of equalization under the responsibility of the High Authority.
Whereas however, having regard to the increasing consumption of ferrous scrap the system in use until now must be so improved as to encourage a saving in ferrous scrap without however increasing the difficulties of creating new productive capacities for steel …’
The scheme thus has two objectives: (1) the equalization of the prices of imported scrap with the prices of scrap recovered in the Common Market (in order to ‘ensure supplies at a reasonable price’) and joint purchases on behalf of consumers to be designated later (in order to have reserve supplies capable of meeting instantly unforeseen deficiencies). This objective is constantly to ensure regular supplies to the market. (2) Graduation of the financial burden of equalization in terms of consumption in excess of that in a reference period. The purpose is to provide an incentive to effect economies in ferrous scrap ‘without however increasing the difficulties of creating new productive capacities for steel’.
These are the methods prescribed for the attainment of the second objective which distinguish the new decision from the previous scheme and which constitute the subject-matter of the present disputes.
These methods are essentially intended to emphasize the selective nature of the cost of financing the equalization system which was already featured in the scheme for the compensation of pig-iron and ferrous scrap incorporated into the system by Decision No 14/55. Henceforth the contribution of every undertaking was to be calculated by applying two distinct rates to its purchases of ferrous scrap: first a so-called ‘basic rate’ applied to all purchases; secondly a so-called ‘supplementary’ rate applied to the excess consumption of bought scrap in relation to the consumption for a specific period. This second method of calculating the contribution has itself a dual characteristic in that on the one hand it retains the graduation of the supplementary rate according to the successive accounting periods, and on the other the granting of refunds on the part of the contribution so calculated according to reductions in the specific input reference of ferrous scrap in the plant and in the manufacturing processes operated by the undertaking in question.
Let us examine this scheme in detail.
Like any financial arrangement concerning compensation it involves income and expenditure and the institution responsible for the administration must ensure their ultimate balance.
Article 2 of the decision lists the expenditure under the following three headings: (1) the equalization of the price of ferrous scrap imported from third countries; (2) financing of scrap purchased from third countries on behalf of consumers to be designated later; (3) the payment of bonuses for scrap saved through the increased use of pig-iron.
The list, which is practically identical with the list contained in Article 2 of Decision No 13/55, calls for the following remarks: First of all the second heading, relating to purchases on behalf of persons to be designated later, refers to advances which must be balanced by the repayment of an equal sum when the tonnages thereby obtained are transferred to the recipients. The ‘special account’ thereby opened in the accounts of the CPFI thus does not ultimately constitute a charge on the budget of the compensation scheme.
Whilst the third heading provides for the payment of bonuses in respect of scrap saved through the increased use of pig-iron it must be pointed out that this system, which has merely been taken from Decision No 14/55 and the implementing provisions thereof (Decisions Nos 26/55 and 3/56) was only kept in force provisionally, until 31 July 1957. On this date the system of compensating pig-iron and scrap was to be repealed, to give way to the system of encouraging economies in scrap, based on the calculation of the contribution at the supplementary rate and on refunds granted in respect of the reduction in the specific input of ferrous scrap.
So much for expenditure.
With regard to income, this consists of contributions from every undertaking which receives scrap.
Pursuant to Article 3 of the decision this contribution can be calculated by applying:
a basic rate to the consumption of scrap bought during the accounting period (Article 3 (1) (a) and Article 4 (2)).
a supplementary rate to the excess consumption of bought scrap, that is to say to bought scrap consumed during the accounting period in excess of the so-called ‘reference consumption of ferrous scrap’ (Article 3 (1) (b) and Article 5).
In the terms of Article 6 (1) the reference consumption of bought scrap shall be half the consumption of bought scrap consumed during a period of six calendar months within a period of seven consecutive months, selected by the undertaking, between 1 January 1953 and 31 January 1957. This apparently complicated procedure is intended to permit each undertaking itself to choose its reference period for bought scrap ‘exempt’ from the contribution at the supplementary rate and divides this figure by two in order to render it comparable with the consumption of each accounting period, which extends over three months.
The calculation of the supplementary rate is inseparably bound up with the calculation of the basic rate; in fact Article 8 states that the former shall be fixed at a percentage of the latter.
Since the supplementary rate only came into operation with effect from 31 July 1957, that is after the expiry of the system of bonuses compensating pig-iron and scrap, it is clear that ultimately this amount is determined exclusively by the accounting requirements of the system for the equalization of imported ferrous scrap. In other words the supplementary rate is calculated arithmetically, pursuant to Article 8, on the basic rate and the latter, in accordance with the rules of the equalization scheme, is fixed in terms of a certain number of factors such as the tonnages imported, the import price, tonnages acquired in the Common Market, the weighted price of such purchases and the equalization price …, which are all factors themselves directly relating to the state of the market.
Accordingly the incidence of the supplementary rate of contribution in the allocation of the financial charge of the scheme for the equalization of imported scrap is directly related to the volume of imports and the difference between the prices on the Common Market and the prices prevailing in third countries. When the volume of imports and this price differential decrease, the basic rate and consequently the supplementary rate tend to nil. When imports and the price differential rise because of the increase in demand, that is to say when the quantity of ferrous scrap used increases, the supplementary rate of the contribution becomes heavier and constitutes an increased incentive to save ferrous scrap.
There is thus a reciprocity between the fluctuations in the market and the incidence of the charge resulting from the supplementary rate; this reciprocity increases the burden of the charge but renders it correspondingly easier to bear when the demand increases, that is when corresponding economies in ferrous scrap are most necessary and, on the other hand, it is less burdensome when economies in ferrous scrap have become less necessary since the demand has fallen off.
Nevertheless the incentive to effect economies does not result exclusively from the application of a supplementary rate of contribution to tonnages bought in excess of the reference consumption. Whilst this last measure is indeed capable of inducing a certain economy in scrap in absolute terms through the graduation of a financial charge in terms of quantities in order to reintroduce into the scheme the marginal effect which was lacking in the initial ‘pure’ equalization, it is clear that the system of refunds laid down in Article 9 of the decision tends for its part to induce a saving in ferrous scrap in relative terms. This provision in fact provides for reliefs in the contribution at the supplementary rate in terms of the percentage by which the undertaking reduces its specific input reference for ferrous scrap in relation to the average specific input reference for its reference period and the average specific input weighted by the Community, the relative economy being measured with regard to each plant and manufacturing process.
The importance of these possible reliefs must be emphasized. Pursuant to the second subparagraph of the first paragraph of Article 9 ‘the percentage of this rebate shall be equal to five times each of the above percentages but the total may not exceed 100 % of the contribution at the supplementary rate’. This selective measure may thus in appropriate cases confer exemption from all liability to the supplementary rate.
Unlike the previous system of ‘pig-iron/ferrous scrap’ bonuses Article 9 of the decision provides for the granting of refunds in terms of the reduction in the specific input reference of ferrous scrap in all plant and manufacturing processes using scrap, and in plant and processes used to produce pig-iron (where the economy will arise from the possible substitution of coke and ore for ferrous scrap) together with those used to produce steel (where the economy will arise from the possible substitution of pig-iron or liquid Bessemer steel for ferrous scrap).
On this analysis the graduation of the financing of the equalization scheme is further shown to be accompanied by a body of transitional provisions which render it steadily progressive, under rules which must now be considered.
On the one hand it is provided that the supplementary rate shall only reach its maximum (100 % of the basic rate) after fifteen months, in fact only during the last quarter of the period when the decision was in force. During the first six months when the scheme was in force, as we have seen, the supplementary rate was nil; thereafter it rose to one quarter of the basic rate for the first accounting period beginning on 1 August 1957, when the system of ‘pig-iron/ferrous scrap’ bonuses was suspended; it was increased to 50 % of the basic rate from 1 November 1957 and to 75 % from 1 February 1958. Those provisions were enacted in Article 8 of the decision and postponed for some considerable time the full effect of the scheme.
Further, to the same effect, the provisions of Article 6 tend to cushion the effect of the qualitative criterion of the ‘reference consumption’ on the basis of the part of the contribution calculated at the supplementary rate by granting a notional reference consumption and a notional specific input reference not only for plant and manufacturing processes put into operation during the reference period but further for those put into operation during the period up to 1 February 1958, that is to say for a year after the date of the entry into force of the decision. It was also provided (Article 6 (3) in fine) that for plant put into operation after 1 February 1958 a specific input reference would be applied, which in appropriate cases might confer entitlement to the grant of the rebates for which provision is made in Article 9.
This, analysed as objectively as possible, constitutes the financial arrangement made by Decision No 2/57.
It is pointless to make a detailed list of the conclusions in the various claims and the submissions made in support of them since the Judge-Rapporteur has analysed them exactly and very fully in the reports for the hearing.
I merely wish to note with regard to the conclusions that all the applicants have claimed the annulment:
of Article 3 (1) (b) establishing the supplementary rate; of Article 6 (3) rendering the reference consumption entirely inapplicable to plant put into operation after 31 January 1958;
of Article 8 graduating the supplementary rate by periods, and of Article 9 providing for refunds.
The Groupement des Hauts Fourneaux et Aciéries Belges (the applicant in Case No 8/57) puts forward these minimum claims whilst the other applicants submit additional claims relating to a fairly substantial number of provisions which have an affinity to those fundamental provisions. In fact, as the Court is aware, the applicants are all in agreement in contesting the innovations contained in Decision No 2/57, that is to say the establishment of the supplementary rate and of the procedures which accompany it in order to encourage the undertakings to effect economies in ferrous scrap, as distinct from those provisions relating to the scheme for the equalization of imported ferrous scrap which have been taken from previous decisions.
With regard to the submissions each of the applicants complains that the decision is vitiated because of misuse of powers affecting it. All the applicants claim misuse of powers in connexion with: (1) a certain number, or the majority, of the objectives of Article 3 of the Treaty; (2) Article 59 concerning allocations if shortages occur; (3) Article 54 concerning investments.
Furthermore, the applicant in Case 9/57 (Chambre Syndicale de la Sidérurgie Française) and the applicant in Case No 12/57 (Syndicat de la Sidérurgie du Centre-Midi) claim disregard of the ‘common interest’ which must form the basis of all action undertaken pursuant to Article 3. The applicant in Case 8/57 (Groupement des Hauts Fourneaux et Aciéries Belges) claims disregard for the objective stated in the decision itself (encouragement to save ferrous scrap ‘without, however, increasing the difficulties of creating new productive capacities for steel’). It also claims misuse of powers in relation to Article 4 of the Treaty, as does the applicant German undertaking in Case No 13/57. Finally the applicant in Case 13/57 also claims misuse of powers with regard to Article 58 (a large number of the applicants invoke Article 58) and with regard to Article 65 (the contested provisions are ‘more restrictive than is necessary for [their] purpose’).
Furthermore the applicants in Case No 13/57 considered that the contested decision, at any rate in so far as the aspects in dispute are concerned, is a decision which is individual in character with regard to each of the applicants and that this permits them, pursuant to the second paragraph of Article 33, in addition to rely upon various grounds of infringement of the Treaty and not merely upon misuse of powers.
If as balanced a view as possible is adopted of the arguments as a whole of the various applicants it seems that their complaints may be divided into three groups:
(A)
The first group is founded essentially upon the disparity which forms the basis of the system in Decision No 2/57, in the part complained of: the supplementary rate itself, which is intended to impose a heavier tax upon excess consumption of ferrous scrap and which thus produces an unequal effect upon the total consumption of each undertaking; the graduation of that rate which clearly sets up a disparate system amongst the undertakings, the lack of a reference period in respect of plant put into operation after a certain date where the disparity does not relate to undertakings but to plant. Finally the system of bonuses in respect of economies in ferrous scrap through the reduction of the specific input reference which gives rise to a disparity at the expense in particular of undertakings which for technical reasons cannot reduce their specific input reference.
With regard to this first group in which really appear the basic criticisms levelled by the undertakings, the principal basis is Article 3 (b) of the Treaty under which the High Authority must ‘ensure that all comparably-placed consumers in the Common Market have equal access to the sources of production’. The criticisms are also based on Article 4 (b) which prohibits discrimination especially in prices, since the system gives rise to double prices (the expression ‘double market’ was indeed applied). More generally the applicants rely upon the principle of equality, considered as a general principle of law, and indeed the ‘common interest’ which the High Authority is alleged seriously to have disregarded.
(B)
The second group of complaints of those in which it is alleged that the contested decision disregarded the objectives of Article 3 (d) and (g): Article 3 (d) to ‘ensure the maintenance of conditions which will encourage undertakings to expand and improve their production potential’ (accordingly only the first part of the sentence is relevant); Article 3 (g) to ‘promote the orderly expansion and modernization of production, and the improvement of quality …’ (it was rightly considered that the remainder of the subparagraph was irrelevant to the dispute). Those complaints are principally relied upon by undertakings or groups of undertakings whose production is based on ferrous scrap and which cannot adopt substitutes for it, in particular undertakings with solid-charged electric furnaces. In Case 8/57 another criticism is added to this second group, relating to an internal contradiction in the decision itself in that, as is stated in one of the recitals, it claims to effect economies in ferrous scrap ‘without however increasing the difficulties of creating new productive capacities for steel’.
(C)
Finally I will set forth in a third group the criticisms according to which the High Authority has through a financial arrangement under Article 53 pursued objectives which might lawfully be pursued only under other provisions specifically enacted for those purposes, that is: (1) the objective of allocation which is admissible only under Article 59; (2) guidance of investments and indeed a more or less direct influence on investments which should be governed by Article 54. In this connexion the contested decision is vitiated by a ‘misuse of procedure’.
As the Court is aware the contested decision was adopted pursuant to Article 53 (b) of the Treaty. In order to settle the dispute it is thus necessary to establish the extent of the powers which the High Authority possesses under this article: indeed I think that this really constitutes the dispute since, when this point is settled it is sufficient to apply it to the present case and it only remains to decide certain questions of fact, procedure or admissibility.
That is why, in the interests of clarity rather than logic, I shall allow myself to deal first with the question of the substance and to leave until later points relating more to form, in particular the inevitable separation which Article 33 requires between factors which relate to misuse of powers and those which do not.
First what is to be understood by ‘financial arrangement’ within the meaning of Article 53, which Mr Paul Reuter in the report which he gave at Stresa on intervention by the High Authority, referred to. as this ‘mysterious Article 53’, merely adding that it involves ‘the introduction of a levelling process in the conditions of competition in the Common Market’? (Centra Italiano di Studi Giuridici, Atti Ufficiali del Congresso Internazionale di Studi sulla CECA, Milan, p. 14).
But is this article really as mysterious as it is claimed to be? It should first of all be noted that it relates to financial arrangements ‘common to several undertakings’ which immediately brings to mind ‘equalization’ or compensation arrangements like those which exist or often have existed in domestic economic legislation in our countries. Further, the Treaty and the Convention on the Transitional Provisions themselves provide for or make such arrangements for specific objectives: I shall refer only to the equalization arrangement made by Articles 25 to 27 of the Convention for the benefit of the Belgian and Italian coal industries, with which the Court is familiar, and the equalization paid both between undertakings in the same coalfield and between undertakings in different coalfields pursuant to Article 62 of the Treaty. This latter example is relevant because it shows that the procedure may be applied to cope with problems caused by certain disparities within the Community and not only with those arising from disparities between import prices and domestic prices. This is brought out clearly in a passage of the report of the French delegation (p. 152) which has already been mentioned in the oral procedure and to which I again refer the Court:
Under the heading ‘Indirect Regularization of the Market’ the report reads as follows:
‘Under indirect methods are grouped:
the financial arrangements for which provision is made both in the Treaty and in the Convention;
the provisions applicable to any fixings of prices either within the Common Market or indeed with regard to exports;
cooperation between Member States to stabilize demand’,
under the subheading ‘Financial Arrangements’ is the following:
‘Although in accordance with the spirit of the Treaty pricing arrangements must be relied upon as much as possible to ensure the operation of the market, experience shows that too wide disparities, for example between the conditions under which supplies from different sources are obtained or under which the production of different markets may be sold or finally between the actual conditions of the production of different undertakings in different areas, cannot be overcome quickly enough and without disturbance by the operation of prices alone; in this case it may be necessary to make provision for some measure of compensation.’
Accordingly this indeed constitutes an indirect regularization of the market, on the same basis as direct intervention in regard to prices, which consists in establishing compensation intended to correct the effects of the system of prices.
In the present case, as we have seen, we have an equalization arrangement of the classic kind, in that its objective is to equalize the prices of imported scrap and domestic scrap. The only difficulty (and as I willingly concede, it is considerable) is whether the disparate allocation of the equalization charge amongst the undertakings in the Community which consume scrap, as has been provided for in Decision No 2/57, and the purposes for which this was done, are compatible with the Treaty. Nevertheless we now understand, clearly enough, as it appears, what is meant by a financial arrangement under Article 53 and the function which this article is required to perform in the Treaty, ill-placed as it is in Chapter II of Title III under the heading ‘Financial Provisions’.
We must now consider under what conditions the High Authority exercises the powers which it holds under Article 53 of the Treaty.
First of all there are conditions relating to form which the wording makes clear and which do not present difficulties. In this connexion I shall only remark upon one point which cannot fail to strike the most casual reader: namely the considerable distinction drawn by the wording of the provisions with regard to formal requirements between the arrangements under subparagraph (a) (which require authorization since they are made freely by the undertakings) and the arrangements under subparagraph (b) made by the High Authority itself: there is to be consultation with the Consultative Committee and the Council in the former case and the unanimous assent of the Council in the second, that is, the most stringent formal requirement of all and one which is only encountered in the Treaty by way of exception.
Is this difference justified only by the fact that in the second instance, since participation in the arrangement is obligatory, this power of compulsion must normally require special guarantees or is it not also to be explained by the fact that, since the arrangements under subparagraph (b) are ‘made’ by the High Authority, as stated therein, it follows that the latter is wholly responsible for the arrangement, ‘itself’ applying it for specified, that is to say largely interventionist, objectives? For the time being I shall merely raise the question.
The second condition laid down by the provisions of Article 53 for the exercise by the High Authority of its powers is a basic condition: the arrangement, authorized or made, must be recognized ‘to be necessary for the performance of the tasks set out in Article 3’.
However this immediately meets with an objection: Article 3 lists all the objectives which the Community should pursue and can easily provide a basis for any action in any direction. Is it really to be considered that this constitutes a meaningful and legal restriction on the powers of the High Authority and consequently a guarantee which the Court will uphold on behalf of the persons concerned?
The applicants in Case 13/57 were well aware of this aspect of the problem and they have maintained that the High Authority required to pursue at the same time and equally all the objectives in Article 3. Whilst there are certain contradictions between those objectives and the need for a compromise is clear, such a compromise must, however, be ‘reasonable’ and must not sacrifice, even in some degree, any of the legal objectives; if such a sacrifice were necessary, that is to say if pursuit of one objective were incompatible with pursuit of another, the High Authority would then have to refrain from using its powers under Article 53 and could only have recourse to the specific powers which it possesses under other provisions of the Treaty.
I consider that this argument is in principle correct but that it is an over-simplification. It is correct in that there may be a more or less significant contradiction between the various objectives of Article 3 with regard to a specific problem and reconciliation may appear necessary. However it is quite normal that, according to the circumstances, pursuit of one objective may be considered more important than pursuit of another or else any real action or policy on the part of the High Authority would become impossible: the essential point is that the High Authority, whilst pursuing its principal objective, must not neglect the others and must make the necessary reconciliation as best it can between the interests entrusted to it. In this matter the High Authority enjoys a considerable, although not unlimited, discretion. The Court of Justice is required to ensure that the High Authority has not deliberately or unnecessarily disregarded one of the objectives in Article 3: it is a question of degree.
Furthermore a perfect illustration of this aspect exists in the Treaty itself at Article 61 (a) in connexion with fixing maximum prices: for such a fixing it is a condition that it is necessary to attain the objectives set out in Article 3, ‘and particularly in paragraph (c) thereof’ ; paragraph (c) is the provision which requires the High Authority to ensure the establishment of the lowest prices. It is clear that this constitutes the essential objective which must be pursued in a decision fixing maximum prices and which justifies the ‘particularly’, but the High Authority must not neglect the other objectives of Article 3, and this constitutes a further justification for the same ‘particularly’ as against ‘only’.
So much for the conditions with regard to form and to the objectives. However do they constitute the only limits to the powers of the High Authority when it acts pursuant to Article 53? By no means. For my part, I consider that there are three other limits, or more precisely, three categories of limits.
First of all there are the prohibitions set out in Article 4: these prohibitions are binding, general and absolute and, although those which are set out in subparagraph (a) (customs duties and quantitative restrictions) and in subparagraph (c) (subsidies, aids or special charges granted or imposed by States) cannot apply to the High Authority the position is different with regard to the prohibitions in subparagraphs (b) and (d), the former relating to discrimination between producers, purchasers or consumers and the latter to ‘restrictive practices which tend towards the sharing or exploitation of markets’. There is no doubt that the measures and practices so listed refer principally to undertakings but it is also conceivable that the High Authority may be covered and, as the Court is aware, in the various applications discrimination is one of the complaints which have been submitted against the High Authority. Of course it remains to define ‘discrimination’ and how it may occur in the context of a financial arrangement such as that with which we are concerned; I am not yet ready to deal with this matter. As this point I simply wish to emphasize that a decision adopted pursuant to Article 53, like any decision of the High Authority, must observe the prohibitions set out in Article 4.
Another category of limits to the powers the High Authority consists in the requirement to observe the specific provisions of the Treaty, such as Article 59 concerning shortage and Article 54 concerning investments. This corresponds to the third group of grounds in the classification which I have just established.
In this connexion I do not think that there are any further difficulties in principle: it is certain, as the High Authority has indeed recognized, that the financial arrangements under Article 53 cannot include measures which may properly be enacted only under a provision specifically providing for such measures and by means of the procedure laid down for this purpose. This is the case for example in allocation which is only provided for in Article 59 and accordingly is lawful only if it is effected in accordance with that article. Of course we find again that the difficulty begins when the principle is applied: the difficulty arises chiefly in defining the scope which it was intended that specific provisions should have, which might be termed the extent of the sphere reserved.
I come now to the last category of restrictions which, when it is considered, will allow us to arrive at a solution, or at any rate I hope it will, because consideration of this category will compel us to consider Article 53 in relation to the Treaty as a whole, by which I mean the limitations relating to the priorities which the Treaty sets for the exercise by the High Authority of its powers. The Court is familiar with the provisions of the Treaty in this matter. The most important provisions are the three which follow:
the first paragraph of Article 5 which states that ‘the Community shall carry out its tasks in accordance with the Treaty, with a limited measure of intervention’;
the said Article 5 where, some lines below, it is stated that the Community shall ‘ensure the establishment, maintenance and observance of normal competitive conditions and exert direct influence upon production or upon the market only when circumstances so require’;
and Article 57: ‘In the sphere of production, the High Authority shall give preference to the indirect means of action at its disposal, such as:
cooperation with Governments to regularize or influence general consumption, particularly that of the public services;
intervention in regard to prices and commercial policy as provided for in this Treaty.’
The conclusion has sometimes been drawn, perhaps a little hastily, from those provisions that the Common Market established by the Treaty was based upon free competition and that, consequently, intervention by the High Authority was of necessity in the nature of an exception. It was easy to oppose this view with another conception founded on the one hand on the extremely broad nature of the objectives of the Community, as set out in Articles 2 and 3 which encompass no less than the promotion of the welfare, in this world only, it is true, of the peoples of the Member States, and on the other, on the vastness of the powers which the Community institutions, particularly the High Authority, possess for this purpose. Considered in this light there appears to be some doubt whether the intervention of the High Authority is ‘exceptional’ or ‘limited’ in its nature, especially if it is considered that the sole means at the disposal of the Community for the attainment of these ambitions is the operation of a common market which, for good measure, is limited to coal and steel.
As Mr Paul Reuter noted, not without a touch of humour, in the abovementioned report which he gave at Stresa:
‘Article 3 is in no way concerned with routine operations; it confers upon the Community a particularly active role since it must attain seven objectives with regard to which its action is defined three times by the word “promouvoir” and once by the word “assurer”, particularly “energetic” words. (
2
) If the seven objectives listed were attained within the Community its prosperity and state of balance would reach a very advanced level: but if those objectives were into the bargain attained without intervention the economic prosperity would be founded on a basis as yet unknown.’ (op. cit., p. 41).
As is often the case the truth is somewhere between those two extremes, but that does not necessarily mean in the centre: where then does it lie?
It is tempting to make a reference at this point to the modern economic theory which, as I understand it, has succeeded in reconciling proponents of the liberal and of the state-run economies: the former concede today that intervention is a necessity, as are the competent institutions to effect it, whenever market forces alone fail to produce the proper results (which, according to them, is bound to occur if there is no intervention since failure to intervene of necessity leads to monopolies) whilst the latter, the proponents of the state-run economy, agree in conceding that the objective of all intervention must be to achieve the results of a perfectly-functioning market economy. Nevertheless, even conceding that such reconciliation is not restricted to the realm of pure theory and that it may be of real practical importance (although doubts may be entertained on this point) it is at all events certain that it does not provide us with even the vaguest legal guidance for the application of the Treaty. Lawyers are more demanding, or at least make other demands, and wish to know to what basic concepts the relevant provision relates. Mr Paul Reuter has put it very well indeed and I should again like to quote him (op. cit., p. 17):
‘It is possible to envisage on a purely theoretical plane two perfectly coherent and logical systems, one completely based on competition and the other entirely state-run. All other systems may be described as hybrids of those two systems, one of which provides the logical framework, conceptions and definitions against which the elements borrowed from the other are set,’
and Mr Reuter adds that the system of the Treaty is apparently defined on the basis of competition. However, as I had occasion to observe in Case 1/54, this is so-called ‘normal’ competition, the ‘effect’ of which must be exercised within the framework of certain rules which the High Authority is in fact bound to observe: this situation allows Mr Reuter to make the following remark:
‘intervention and competition are not contradictory: in these times the attainment of competition is based upon intervention’ (page 18).
Accordingly two very distinct categories of intervention emerge:
(1)
Intervention which in fact has as its objective the definition of the rules on competition and their enforcement: this category is essentially concerned to ensure the application of the prohibitions set out in Article 4, amongst which is the prohibition on discrimination (Articles 60 and 70) and agreements (Article 65). In this sphere the High Authority must exercise constant vigilance and its intervention must be considered normal, or, more precisely, it would have to be classified as ‘exceptional’ only in so far as the behaviour of the persons concerned was so unexceptionable that the number of infringements itself was exceptionally low. This constitutes policing no matter what economic effects such action may in fact have.
(2)
Intervention in regard to production and the market with which we are concerned in the present dispute. This is the type of intervention which is found in the three passages in which the Treaty accords preference for indirect means of action, that is the two paragraphs of Article 5 which I have already quoted and Article 57.
Scrutiny of those three passages prompts me to make three observations. First Article 57 clarifies any ambiguity which might have existed in Article 5. Let me read Article 57 again:
‘In the sphere of production, the High Authority shall give preference to the indirect means of action at its disposal, such as:
cooperation with Governments etc. (this is clearly an indirect means of action);
intervention in regard to price and commercial policy as provided for in this Treaty.’
Thus in accordance with the Treaty intervention in regard to prices (for example the fixing of maximum prices pursuant to Article 61), which is nevertheless a direct infringement of the liberty of undertakings, constitutes an indirect means of action on production. This can only mean that direct action on prices is indeed capable of altering the conditions of competition and consequently of affecting ‘production’ albeit indirectly in that competition is not abolished. This is what is stated, in my view very clearly, in Article 61 itself, to which I have already referred, when we read in the penultimate paragraph that ‘in fixing prices [maximum or minimum] the High Authority shall take into account the need to ensure that the coal and steel industries and the consumer industries remain competitive, in accordance with the principles laid down in Article 3 (c)’, and the Court is aware of the extent to which those ‘principles’ in Article 3 (c) provide protection for the individual rights and interests of undertakings. This constitutes an essential guarantee which no longer obtains when direct intervention is effected with regard to production (Articles 58 and 59), when the operation of the market in so far as it is based on competition is totally suspended.
Secondly an important point must be made. The distaste of the authors of the Treaty for direct intervention with regard to production was such that, even if the conditions required for the authorization of such interventions had been fulfilled (Article 58, ‘a period of manifest crisis’, it is necessary that matters shall in fact have reached a crisis; Article 59, the existence of a ‘serious shortage’; danger is not enough, the shortage must exist) it must further be clear ‘that the means of action provided for in Article 57 (that is to say indirect means of action) are not sufficient to deal with this’ (namely the crisis or shortage): the hope is still cherished that resort to extreme measures may be avoided.
Finally a third observation may be made, namely that alongside this clear dislike of extreme measures it may further be inferred from perusal of the provisions that generally intervention on the market must only be effected in cases of necessity: this condition, which is contained in the two subparagraphs of Article 5 already quoted, is found in particular in Articles 61 concerning intervention in regard to prices. Nevertheless this does not mean that such intervention on the market, which does not suspend competition and remains compatible with what for the sake of convenience may be termed the ‘economy of the market’ are in fact exceptional, in the sense of ‘unusual’. It depends of course upon the state of the market: it also depends to a considerable degree upon the policy of the High Authority.
In this respect it seems to me that the matter has been well expressed in the two following passages from the report of the French delegation:
The first passage relates to prices (page 154):
‘The Treaty is in no way dogmatic concerning the fixing of prices. It does not claim that in the coal and steel industries it is always necessary to have prices fixed by the authorities or, on the other hand, that the fixing of prices can be strictly reserved for exceptional periods. The fixing of maximum prices is subject to the condition that it is necessary to attain the objectives laid down for the Community.’
The second passage occurs in the preamble to the second part, which is devoted to economic and social provisions, (page 71):
‘If, however, a general economic philosophy is to be discerned in the Treaty it is that no rule or method is uniformly valid and uniformly applicable in any and every economic situation. The objectives of the Community must normally be attained through the operation of the market and the action of undertakings. Nevertheless it would be inconceivable not to envisage protective measures for exceptional periods when intervention may prove necessary; and if such circumstances arose the persons concerned would be astonished if no provision had been made for those powers which are in fact laid down in the Treaty, subject to the guarantees which accompany them.’
This contrast is most informative since it clearly illustrates the different view adopted, on the one hand, as to the exercise of powers with regard to prices to which recourse is no doubt to be had only if it is clearly necessary, although this necessity may frequently occur, and which, as was intended by the authors of the Treaty, remains compatible with the functioning of the market and the action of undertakings, and, on the other, as to the ‘protective measures’ if ‘intervention proves necessary’, that is to say direct intervention in regard to production which is envisaged only for exceptional periods.
It is superfluous to add that I felt it necessary to quote those two passages only because they seem to me to provide a relevant illustration of what in fact emerges from a mere perusal of the actual wording of the Treaty.
The Court is no doubt aware why I felt it necessary further to examine this latter category of restrictions on the powers of the High Authority, namely the category which deals with what I have termed the ‘priority’ which the High Authority must observe in exercising its powers: this is because we are here concerned with the basic concepts of the Treaty with regard to economic power.
A number of views are possible with regard to this last category but it cannot be left out of account if it is desired to interpret correctly, I am almost tempted to say ‘faithfully’, the provisions embodying those restrictions.
It is clear that the Court can only review the observance of this priority subject to the conditions in Article 33.
I now consider that following this analysis it should be possible to provide a reply in principle to the question whether a financial arrangement under Article 53 may be employed as an indirect means of action in order to change conditions of production so as to avoid recourse to direct methods such as allocation pursuant to Article 59.
I consider that this reply in principle must be in the affirmative, first because there is nothing to the contrary in the wording of the provisions, secondly because it is not at variance with the concept of a financial arrangement which is based, as we have seen, on the notion of ‘compensation’ but which may take many forms, and thirdly because the Treaty, if I am correct, makes provision for a graded series of steps, almost a hierarchy of means for affecting production and recourse to direct action entirely suspending the economy of the market is only envisaged as a last resort. As we have also seen a financial arrangement constitutes an indirect procedure for regularizing the market. If it thus appears that this procedure must be accompanied by certain measures for it to be able to affect the conditions of production so as to avoid the final recourse to direct intervention such a decision will be fully in accordance with the intentions of the authors of the Treaty, as they have been set out in particular in Articles 5 and 57.
It is nevertheless clear that such a decision must observe all the limits which are contained in the Treaty.
I must now return to Decision No 2/57 and consider whether it fulfils those various conditions.
This decision establishes a scheme for the equalization of imported ferrous scrap, one of the features of which consists in allocating the equalization charge unevenly amongst the undertakings in order to encourage them to effect economies in ferrous scrap.
The first question which must logically be asked is whether the very establishment of the scheme, or rather its maintenance by Decision No 2/57, is in accordance with the Treaty. It is true that this question has nowhere been raised in the applications which do not contest the principle upon which the decision is based, merely parts of the decision. Nevertheless because the scheme forms an entity, as I have already emphasized, it may be thought that the Court should consider this question of its own motion. Be that as it may the point need not detain us for the following reasons:
(1)
The question could only be considered with regard to misuse of powers: there is no allegation that misuse of powers with regard to maintenance of the scheme for the equalization of imported ferrous scrap and indeed all the applicants concur in this.
(2)
Even if the first paragraph of Article 33 were applicable, disregard of this paragraph could only be relied upon under the restrictions on the powers of the Court which follow from the second sentence of that paragraph — the sentence which begins with the words ‘the Court may not, however’, — that is to say in a case of ‘manifest’ disregard. May it indeed be asserted (to adopt the wording of the judgment of the Court in Case 6/54, Government of the Kingdom of the Netherlands) that the Court may find in the present case ‘the existence of an economic situation which prima facie reveals no necessity for the contested measure in the pursuit of the objectives set out in Article 3 of the Treaty’? In other words is it possible to maintain that the situation on the market in ferrous scrap at 26 January 1957clearly rendered futile the maintenance of a scheme of equalization between the prices of imported scrap and those of Community scrap? It seems to me that this can be ruled out.
The problem must thus be confined to the part of Decision No 2/57 which forms the subject-matter of the applications, that is to say to the provisions which modified the allocation of the equalization charge in the circumstances which the Court knows.
First of all was such a modification, involving indirect intervention in the conditions of production, ‘necessary’ to attain the objectives set out in Article 3?
I consider that it is clear from both the written procedure and the statements made at the bar that it can scarcely be doubted that, during the weeks leading up to Decision No 2/57, there were serious difficulties in the supply of ferrous scrap to the Community which gave rise to grave fears for the immediate future. It is also true that the situation subsequently became easier but the Court must clearly appraise the lawfulness of the decision in relation to the situation at the time immediately before the date of the decision.
At this point the High Authority had to make an ‘economic choice’. In fact, as the Court is aware, it had already been faced with this choice for some time. Until the establishment of the ‘pig-iron/scrap’ system the scheme for the equalization of imported ferrous scrap remained on classic lines, that is to say the equalization charge was allocated purely by the ton, undifferentiated, and ‘the equalization price’ on the other hand was fixed by the institutions in Brussels at the average level of the price of Community scrap, all categories of scrap being taken together. The High Authority itself has expressly recognized that this scheme, far from checking consumption of ferrous scrap, was by itself such as to encourage consumption; so preventive measures were necessary. First of all there was the ‘pig-iron/scrap equalization scheme’ which proved insufficient and then the scheme set up by Decision No 2/57. Nevertheless the other option of the ‘economic choice’ to which I have just referred was to rely, if not exclusively, at least to a greater extent on the effect of prices in order to encourage economies in scrap. If the High Authority considered that it was not possible to abolish outright the scheme for the equalization of imported ferrous scrap, which would have involved a sudden alignment of Community and import prices (the marginal price in the present case) and considerable disparities in the conditions of supply to the market, could it at least influence the equalization price in order to obtain some sort of compromise between the two contradictory objectives with which it was confronted? In other words could it not have fixed the equalization price high enough to provide an incentive to economies in ferrous scrap (and at the same time encourage the retrieval of scrap and — this is of prime importance — avoid the export of scrap from the Community to third countries) but none the less far enough below the import price to limit to a tolerable degree the disparities resulting from the difference in price between the two categories of scrap?
This argument was forcefully expounded, and in my view, rather convincingly, by the Groupement des Hauts Fourneaux et Aciéries Belges in Case 8/57, at least in the course of the written procedure for, as the Court will be aware, it must be said that at the bar the learned advocates for the applicant have scarcely pressed this line of argument.
One of the replies which the defendant made to this argument must be dismissed out of hand: this consisted in the High Authority to some extent taking refuge behind the institutions in Brussels, which alone had power to fix the equalization price, subject to the veto of the High Authority. In fact, since this is an arrangement coming under Article 53 (b), that is to say made by the High Authority, it is clear that the latter must organize the scheme in such a way as to reserve for itself the powers necessary to ensure the functioning of the system in accordance with the policy which it has itself laid down.
Whilst this argument may appear attractive it is not impossible to provide a reply to it. First it is not certain, at any rate it is not clear, that the ‘compromise’ to which I have referred could have been effected, that is to say that it was actually possible merely through the effects of prices, albeit subject to control, to provide a sufficient incentive to undertakings to effect the necessary economies in ferrous scrap without provoking too sudden or too wide disparities in the conditions of supply to the market. Furthermore, and this holds good in any event, if a bad choice had in fact been made, it was made at the outset and not at the point when Decision No 2/57 was adopted. Mr Maurice Allais, in a paper dated 1 September 1957, based on his personal views on the congress at Stresa (Bulletin de la Société d'Études et de Documentation Économiques, Industrielles et Sociales, No 682, p. 20):
‘Where those who now find fault with the direction of the practice of the ECSC err is in failing to understand that, when the legality of the first measures of the High Authority was admitted those measures which followed after 1955 necessarily derived from them if account is taken of the general objectives of the Treaty.’
This opinion is all the more worthy of quotation in that it emanates from an author who, although a most sincere advocate of the unitary nature of the school of thought which seeks to reconcile the theories of liberal and state-run economies, in fact at all times advocates the adoption of the liberal solution in practice.
In the circumstances I consider that the ‘economic situation’ which led to the High Authority's choice was, at the least, sufficiently in doubt for the Court to be unable to undertake the responsibility of substituting its own appraisal for that of the executive. Not merely Article 33 but, even if this article had not existed, elementary common sense based for good measure on the principle of the separation of powers, would forbid it from doing so.
Since the principle of intervention has thus been established we must consider whether the other limitations on the powers of the High Authority's action within the frame-work of Article 53 (b) have been observed. First of all are the objectives of the decision in accordance with the objectives in Article 3?
In this connexion the High Authority adopted as its principal basis the provisions of Article 3 (a): [the institutions shall] ‘ensure an orderly supply to the Common Market …’.
Most of the applicants have objected to this, since they consider that the first objective of the tasks of the Community listed in Article 3 is of such a general nature that it is devoid of any legal meaning. This is no doubt too extreme as the provision has a clear meaning and indeed cases of disregard of Article 3 (a) are easily conceivable. In fact it is certain that the scheme for the equalization of imported ferrous scrap as a whole indeed has as its objective ‘an orderly supply’ of scrap ‘to the Common Market’. Nevertheless there is some truth in the applicants' criticism in this respect: namely that mere pursuit of the objective laid down in subparagraph (a) is not sufficient to justify any action whatever of the High Authority. As the High Authority itself has observed one decision may pursue a number of objectives and furthermore we again encounter the concept of a possible reconciliation between the various objectives of Article 3 with certain of these objectives perhaps emphasized, always provided that the others are not disregarded.
What objective or objectives did Decision No 2/57 pursue?
If reference is made to the ‘recitals’ at the beginning of the decision, which I have already mentioned, there are two such objectives: first ‘to ensure regular supplies at a reasonable price’; for this purpose the High Authority considered it necessary to maintain in force the system established by Decision No 14/55; I now quote the second objective:
‘Whereas however, having regard to the increasing consumption of scrap, the system in use until now must be so improved as to encourage a saving in scrap, without however increasing the difficulties of creating new productive capacities for steel.’
This second point, that which concerns us, is still generally connected with subparagraph (a) in that the ‘orderly supply’ of a scarce material may call for endeavours to effect economies in it. Nevertheless it appears to me that the subparagraph to which the second objective pursued in Decision No 2/57 is most directly related is the second part of subparagraph (d): ‘ensure the maintenance of conditions which will encourage undertakings … to promote a policy of using natural resources rationally and avoiding their unconsidered exhaustion.’ This wording was indeed adopted with a view to products extracted from the earth, such as iron ore. Nevertheless from an economic point of view, if regard is had for the special nature of ferrous scrap considered as a raw material for the steel industry, it seems to me that, mutatis mutandis, this subparagraph is very relevant.
Encouraging undertakings to effect economies in ferrous scrap by adopting a policy of using this raw material rationally is precisely the objective which the High Authority pursued.
Nevertheless has the High Authority failed to effect the necessary reconciliation with the other conflicting objectives of Article 3? It is clear that those other objectives are first and foremost those contained in the first part of subparagraph (d) and at the beginning of subparagraph (g), namely: subparagraph (d): [to] ensure the maintenance of conditions which will encourage undertakings to expand and improve their production potential' and, subparagraph (g): [to] promote the orderly expansion and modernization of production and the improvement of quality'.
It seems to me clear that there is a contradiction between those latter objectives and the main objectives pursued by the High Authority since, on the one hand, technical progress in the steel industry as a whole appears increasingly to involve a preference for the open-hearth (Martin) furnaces and electric furnaces, which use ferrous scrap, and indeed progress even brings about a diminution in the scrap recovered and, on the other, the manufacture of certain products, which I have referred to as ‘special steels’ which are ‘noble’, where ‘the improvement of quality’ is a constant aim, is technically, or at any rate commercially, possible only in electric furnaces which consume only ferrous scrap.
Reconciliation was thus necessary but the High Authority indeed intended to effect such a reconciliation: this is clear from the abovementioned recital: to encourage a saving in scrap, ‘without however increasing the difficulty of creating new productive capacities for steel’.
It is clear that this is only a declaration of intention but it is none the less significant in establishing an objective.
In addition it is always necessary to ascertain by an examination of the decision itself that the objective actually pursued indeed corresponds to the stated objective.
That seems to me certain: the entire system in Decision No 2/57, so far as allocation of the equalization charge is concerned, is based upon an incentive for every undertaking to use scrap only as a matter of duly considered policy. Under this system each undertaking is able to calculate the cost price of the bought scrap which it intends to use so that it has an interest in resorting to scrap as little as possible, either by an increased application of pig-iron or by putting into operation plant which uses less ferrous scrap. If undertakings decide to disregard those incentives it is because technical reasons oblige them to do so, and this is particularly the case with electric plant producing special steels. Accordingly the objective pursued has indeed been attained: to promote the most rational use of scrap, which is too scarce, without however increasing the difficulty of creating new productive capacities for steel. In short a common interest is established for all consumers; everyone benefits since the equalization charge is the counterpart of the maintenance of the scheme for the equalization of imported ferrous scrap and Community scrap which is rightly or wrongly considered essential to ensuring an orderly supply at an average price regarded as ‘reasonable’, but the relative charge for everyone increases in proportion to the indispensability of the scrap.
Ultimately, it does not appear to me that Decision No 2/57 has disregarded the legal objectives in subparagraphs (d), (g); the same applies, for the same reasons, to the ‘internal contradiction’ in the decision, of which the applicant in Case 8/57 complained.
The other objective which all the applicants maintained was disregarded is that contained in Article 3 (b), [to] ‘ensure that all comparably-placed consumers in the Common Market have equal access to the sources of production’. This complaint is closely linked with the complaint relating to Article 4 (b) which prohibits discrimination. Thus, subject to what I shall have to say later concerning the misuse of powers with regard to each of those two provisions, at this point I shall consider them as a whole with regard to the substance of the case. It is in fact clear that the scope of Article 3 (b) completely covers that of Article 4, including thus subparagraph (b) thereof. This at least is clear from the commentary of the report of the French delegation, from which I consider it necessary again to quote (page 103):
‘Furthermore in order to ensure that all the undertakings in this part of the world have bases for common development it is essential that all comparably-placed consumers should obtain supplies at comparable prices (the reference is thus to Article 3 (b)). This is to be attained by abolishing quotas and customs duties, and adjustment of freight rates, in short the non-discrimination provision applied to sellers.’
This latter rule constitutes one aspect of the more general rule contained in Article 3 (b). However the present case does not relate to customs duties or freight rates, merely to the rule of non-discrimination in prices. Thus I am now obliged to treat the thorny subject of discrimination. Nevertheless I shall dwell upon it as briefly as possible since the evolution of a theory of discrimination is undoubtedly beyond me and, as I consider at any rate, irrelevant to the resolution of the dispute.
First of all I shall merely observe that in my view the rule of non-discrimination must of necessity be viewed differently depending on whether it relates to the behaviour of undertakings or of official authorities and, moreover, in the latter case whether such authority is intervening on the market.
With regard to discrimination by undertakings concerning prices, some guidance is given in a particular provision of the Treaty, with which the Court is well acquainted, Article 60. This article prohibits ‘unfair competitive practices’ and ‘discriminatory practices involving, within the Common Market, the application by a seller of dissimilar conditions to comparable transactions, especially on grounds of the nationality of the buyer’. Since the relations in question are between private persons, it is the comparability of transactions which is considered, and this is a more precise concept than the comparability of of situations. Nevertheless, as the Court is aware, although the High Authority was empowered under Article 60 to provide a definition of the comparability of transactions it had to refrain from doing so in its regulation. It was no doubt a fortiori impossible to formulate the concept of comparability of situations regarding the action of the High Authority itself.
It seems that this concept is concerned with what is frequently referred to in domestic law as the ‘principle of equality’ which exists in various countries and which in addition has been relied upon in a number of applications. This indisputedly constitutes one of those ‘general principles of law’ of which the Court can and must take account in appropriate cases. I should like very briefly to consider this question in French and German law.
In French law the principle of equality has been mentioned in the case-law of the Conseil d'État. The Conseil d'État in fact considers it as a principle of unwritten law that ‘all persons in an identical situation with regard to the public services must be governed by the same rules’. The Conseil d'État thus established the principle of the equality of citizens with regard to public charges, the principle of equality with regard to taxation, the principle of the equality of consumers with regard to public services and the principle of equality in the economic order. (
3
) I cannot hope here to give a complete review of this case-law: I shall merely quote the following four judgments in connexion with the last aspect which concerns us, namely the principle of equality in the economic order:
(1)
Syndicat Départmental des Industriels en Lentilles de la Haute-Loire_30 January 1958 (Recueil des Décisions du Conseil d'État, p. 43). This judgment establishes the principle of equality between traders in that it annuls a decision compelling certain importers to obtain lentils ‘only from producers, alone or in cooperatives’ thereby arbitrarily excluding dealers.
(2)
Société des Ciments Français_22 March 1950 (Recueil des Décisions du Conseil d'État, p. 175). This judgment upheld a decision which fixed a single price for one and the same product and thereby established a disparity between undertakings which resulted only from the different operating conditions of the undertaking. Accordingly the principle of equality refers to equality in law and not in fact.
(3)
Les Savonneries de Bourgogne_16 February 1946 (Recueil des Décisions du Conseil d'État, p. 49): in this case the judgment found against the privilege arbitrarily conferred upon a single melting-house to recover tallow when there were two other melting-houses in the département.
(4)
Companie Navale des Pétroles_13 June 1947 (Recueil des Décisions du Conseil d'État, p. 265): this case on the other hand related to the arbitrary withholding from an undertaking of the right to carry out certain operations allowed to other undertakings in the same trade.
These few examples illustrate the extent to which the scope of the principle of equality is restricted by a policy of economic intervention. Naturally I have left out of account an additional reservation to which the Conseil d'État subjects the application of the principles, namely that of the general interest which may always justify the adoption of measures which violate the principle: in fact such derogations which may conceivably be imposed by a sovereign state are inappropriate under the Treaty, the rules of which bind the Community.
With regard to German law I refer the Court to certain passages which seem to me relevant of Huber's Wirtschafts-Verwaltungsrecht, Tübingen, 1954 on intervention in economic matters and the principle of equality:
‘(a)
It is almost universally agreed that the principle of equality before the law set out in Article 3 of the Grundgesetz (Basic Law) is also binding on the legislature: the laws must accord similar treatment to identical facts and different treatment to different facts. Nevertheless it is recognized that different treatment may be applied to situations which, although held comparable from a purely formal point of view, when examined, display differences of substance. The distinctions which are in fact required by the similar nature of situations which are not comparable ultimately constitute a direct duty for the legislature …
…
(c)
Differentiated intervention in economic matters remains in accordance with the principle of equality so long as the author of the measure is guided by reasonable considerations and refrains from establishing arbitrary privileges or discriminations. In economic legislation the legislature is normally obliged to consider the extent to which the relevant situations are comparable and to treat them appropriately. Subsequent consideration can in the normal course of events lead to marked distinctions with regard to quotas, to differences in the degree of importance accorded to or established between the requirements of domestic consumption and marketing abroad without the public authorities laying themselves open to the charge that they have failed to observe the principle of equality. There is no doubt that a careful distinction must be drawn between different treatment and discrimination or, in other words, between an appraisal for which there are objective reasons and an appraisal which is arbitrarily subjective. Article 3 of the Grundgesetz cannot be relied upon as the basis for a complaint that economic legislation incorporates distinctions so long as the legislature refrains from establishing arbitrary benefits or impediments.’
Ultimately it appears to me that when the rule of non-discrimination relates to a decision of the High Authority constituting intervention on the market, the scope of this rule must be appraised first and foremost in the context of this concept of arbitrariness. In the present case if regard is had for the undertakings themselves it appears quite certain that no discrimination has been committed. Likewise, if the categories of undertakings are considered I also think that the violation of the principle of non-discrimination cannot be established either in respect of the application of the same rules to situations which are not comparable or in respect of the application of different rules to comparable situations.
Nevertheless on two points serious doubt may appear justified and I must consider those points. The former concerns undertakings producing special steels; the latter concerns the application of different rules in accordance with the date when plant was put into operation.
With regard to producers of special steels discrimination may be envisaged, as indeed it is by the applicants, under two heads: first of all discrimination properly so-called in regard to prices. The system of Decision No 2/57 leads to the establishment for those undertakings of a double price (reference has even been made to a double market!) because they cannot significantly reduce their specific input reference of ferrous scrap.
If the Court considers the statements which I have just made as relevant it must inevitably reject this line of argument: it is impossible to regard the difference in the production cost of ferrous scrap which follows for the various undertakings from the arrangement under Decision No 2/57 as a difference in price relating to the same product: these are effects arising from the rules for the allocation of the equalization charge in accordance with criteria laid down by the decision, and I have already expressed my views on the significance of these criteria. Reference has also been made to taxation: nevertheless, although it may be possible here to draw an analogy with taxation, it is sufficient to observe that there exist taxes on allocation and that the principle of equality with regard to taxation is by no means incompatible with unequal rules regarding allocation provided that those rules are based upon objective criteria.
In fact (and this is the other angle from which discrimination against a category of undertakings must be considered) what is required, and what the interested parties are entitled to insist on, is that there shall be no infringement with regard to the relevant category of the conditions of competition which form the basis of equality.
The Court is aware that Article 67, which by itself constitutes a complete chapter of the Treaty, is entirely devoted to ‘interference with conditions of competition’. In fact these provisions only refer to action by Member States but perusal of them renders clear the importance of such interference for the operation of a common market based entirely upon competition. Most important of all there is also another provision, to which I have already referred, which, indeed, refers to the action of the High Authority concerning prices: this is the penultimate paragraph of Article 61: ‘in fixing prices, the High Authority shall take into account the need to ensure that the coal and steel industries and the consumer industries remain competitive, in accordance with the principles laid down in Article 3 (c)’. I consider that financial arrangements concerning prices must comply with this provision.
Does Decision No 2/57 adversely affect the ‘competitiveness’ of certain categories of undertakings? The point, as the Court will recall, was discussed with regard to manufacturers of special steels. In this respect such manufacturers are not in competition with producers of other categories of steel in the Community. The problem only arises with regard to competitors manufacturing the same products in third countries; but in this respect it does arise.
The Court will recall the figures which have been submitted.
The applicants have endeavoured, with both ascertainable facts and pure estimates, to persuade the Court that the application of the supplementary rate can entail an increase in the region of 5 % in the production cost of fine carbon steels and special steels. The High Authority categorically disputes those figures, maintaining on the one hand that the factors on which they are based are pure estimates (production costs taken in the past; the supplementary rate selected in the future at its maximum level; the assumed basic rate of equalization is to be maintained at US $10 at least etc.) and, on the other, by reference to a certain number of provisions in the decision which may reduce the amount of the contribution (exemptions for scrap from alloy steel, refunds for reduction of the specific input reference which is possible to a not inconsiderable degree, as has been established on the basis of the documents submitted etc.).
As the Court can see there is no decisive factor. No specific information has been supplied regarding the situation (easy, difficult or under stress) of the special steels industry regarding either the distribution of its products on external markets or maintaining its domestic position against imports. I accordingly conclude that it has not been established that the foreseeable effects of Decision No 2/57 on the competitiveness of manufacturers of special steels was capable of affecting this competitiveness to the extent of justifying exemption for these manufacturers from the scheme or justifying an obligation to make special rules for them.
The second aspect which may give rise to doubts relates, as I have said, to the date for putting new plant into operation since the absence of any reference period in respect of plant put into operation after 31 January 1958 may appear a discriminatory measure. If the Court considers that my views, as I have expressed them at the beginning of my opinion, are correct this is not the case. In fact the disparate allocation of the equalization charge which forms the basis of Decision No 2/57 rests on the notion of discouraging increases in consumption of ferrous scrap by providing undertakings with an incentive to reduce their consumption as much as possible or to increase it as little as possible. It is a logical consequence of the system that new plant should be more seriously affected because such action constitutes encouragement to create new plant with a restricted consumption of ferrous scrap and, as I have said, it is only to the extent that the undertakings consider, despite the increase in charges which will be involved that it is nevertheless in their interest to bear them and take this decision which ultimately results in a rational and most ‘economic’, in the proper sense of the word, use of the raw material.
Nevertheless the High Authority rightly considered that the immediate application of those rules might be unfair since, with regard to plant not yet in operation but already under construction or in respect of which financial obligations had been entered into, there was no longer any option as to the consequences of a new decision. Thus, far from constituting a discriminatory measure, the decision complained of appears to constitute a transitional measure which was intended to implement the new rules in progressive stages only. In this respect I consider that it is impossible to over-estimate the importance of the provisions of Article 9 and of Article 6 (3), taken together, of the contested decision, which confer entitlement to the refunds in respect even of plant put into operation after 31 January 1958 if the specific input reference is reduced.
In order to conclude the point regarding failure to observe the provisions of Article 4 some explanation must be given regarding the failure to observe Article 65 which was relied upon in the application in Case 13/57.
The applicants in this case argue that the reference made in Article 53 (b) to Article 53 (a) and the reference in the latter article to Article 65 means that the High Authority was bound to respect the provisions of Article 65 (2) (b) whereby the agreement authorized shall not be ‘more restrictive than is necessary for that purpose’. The applicants maintain that the refusal to grant a reference consumption in respect of plant coming under Article 6 (3) of the contested decision together with the supplementary charge on excess consumption is ‘more restrictive than is required for the equalization of imported ferrous scrap’. As the Court will appreciate this constitutes something of a misuse of procedure to re-open the question of the very principle of Decision No 2/57 without submitting a fresh line of argument in this connexion since it is clear that the ‘equalization of imported ferrous scrap’ itself provides the justification for the contested part of Decision No 2/57. Thus, even if it is admitted that the reference to Article 65 relates to the arrangements in Article 53 (b) and not only to those in Article 53 (a) (I am personally inclined to concede this since the arrangements made by the High Authority must also observe Article 65) this reference to Article 65 appears to me irrelevant.
It remains to consider whether the contested decision has observed what I have termed the ‘specific provisions’ of the Treaty.
As the Court knows the question has been raised under two heads: with regard to Article 59 and with regard to Article 54.
The question concerning Article 59 appears to me very simple: this article makes provision with clearly specified conditions with regard to procedure and substance for the allocation of coal and steel resources both between the Member States and undertakings. The wording is perfectly clear: it refers solely to allocation of the material, that is to say of categories and tonnages, and nothing else. Article 58 has been relied upon and this is a provision which, if a crisis is followed by the establishment of a system of quotas, permits the regulation of ‘the level of activity of undertakings by appropriate levies on tonnages exceeding a reference level set by a general decision’, that is, by a financial arrangement. However the provisions in fact made for a period of crisis are not those made for a period of shortage (the difference is moreover clearly understandable) and it is not merely by chance that at the beginning of Article 53 reference is made to the existence of two provisions which already provide in specific cases for financial arrangements, namely Article 58, and (in the form of ‘Chapter V of Title Three’) Article 62.
Accordingly the only case in which a financial arrangement must be considered as disregarding the provisions of Article 59 (either by infringement or by ‘misuse of procedure’) is one in which the provisions of such an arrangement would in fact bring about an allocation. This would occur in the present case if it were proved for example that with regard to a specific category of undertakings or of plant and cost price of ferrous scrap, bearing in mind the effect of the contested decision, would be such that any increase in consumption amounted to a prohibition and would therefore be ruled out. No allegation of this nature has even been submitted.
The fact is that the objective of the decision is to discourage non-essential consumption of ferrous scrap, precisely the ‘indirect means of action’ by which it is hoped to avoid recourse to the extreme measure of allocation. In this respect the contested decision, far from disregarding Article 59, is closely in accordance with it.
Article 54 concerning investments has been considered at length both in the written procedure and at the bar and I think it pointless to treat the matter in greater depth. I should merely like to observe that the objective of Article 54 is very clearly defined, namely to permit the High Authority to provide financial aid for undertakings to carry out investment programmes and to provide certain measures ‘in order to encourage coordinated development of investment’. As always the necessary powers are conferred upon the High Authority for those purposes on specified conditions.
Clearly this does not mean that undertakings' investments can be influenced under this provision alone. This is possible through a number of decisions adopted pursuant to several articles in the Treaty and it is quite certain that decisions involving intervention in respect of the market, and still more in respect of production, may have even greater influence on investments. Whatever effect Decision No 2/57 may have had with regard to undertakings' carrying out of investment programmes I do not consider that this decision has in any way failed to observe the specific provisions of Article 54 by impinging upon the sphere reserved for this provision.
To summarize, I consider with regard to the facts:
(1)
That the contested provisions of Decision No 2/57 only constitute one of the means of implementing the financial arrangement made by the High Authority pursuant to Article 53 (b) in order to ensure the equalization of prices of imported ferrous scrap and Community scrap;
(2)
That those implementing provisions nevertheless have, within the framework of the arrangement, an appropriate objective which consists in encouraging all the undertakings in the Community which consume ferrous scrap to effect economies therein ‘without however increasing the difficulties of creating new productive capacities for steel’;
(3)
That this objective must be attained through a system of disparate allocation of the equalization charge in order to vary the cost of ferrous scrap in such a way that the development of steel production through using ferrous scrap is only effected in so far as it is strictly indispensable.
I consider with regard to the law:
(1)
That the financial arrangements made pursuant to Article 53 of the Treaty constitute indirect procedures for regularizing the markets;
(2)
That the same arrangements may if necessary be used as indirect means of action on production and must for this reason be preferred to direct influence, in accordance with Article 57;
(3)
That these arrangements must correspond to one or more of the objectives listed in Article 3 of the Treaty as tasks for the Community without however sacrificing the other objectives, since it is possible that reconciliation may be required, subject to review by the Court on the conditions laid down in Article 33;
(4)
That they must respect the prohibitions in Article 4;
(5)
That they must respect the specific provisions of the Treaty.
I finally consider that, within the context of the conclusions and submissions of the parties and also of the jurisdiction of the Court, Decision No 2/57 must be considered as fulfilling those various conditions.
This conclusion — and also the wish to avoid prolonging considerations which are already over-long — permits me to accord only the briefest of treatment to the questions regarding procedure and admissibility which have been raised by the parties.
With regard first of all to the questions of misuse of powers and of its definition and scope in the Treaty, I have already considered this very fully — if not too fully — in other cases so I certainly must not go over the ground again.
Thus to refrain from considering the question appears to me all the more justified since the case-law of the Court of Justice is well established in this matter. In fact if reference is made to the judgments of the Court it will be found that in each relevant case the Court has considered the misuse of powers as consisting in a failure by the High Authority to have regard for the legal objective in the exercise of its powers (judgment in Case 1/54, Rec. 1954-1955, pp. 32, 33; judgment in Case 6/54, Rec. 1954-1955, p. 226). In the latter judgment application was made of one of the most frequently-used formulae to define classic misuse of powers, namely exercise of powers (by the High Authority) ‘for a purpose other than that for which they were conferred upon it’.
In the Court's judgment of 29 November 1956 in Case No 8/55 this formula was supplemented by reference to the concept of ‘serious lack of care and attention’ which was frequently alleged in the course of the oral argument. Like the advocate for the High Authority I would observe that it is for the Court and the Court alone to provide any clarification of its judgments that may be necessary. But I must say that in my view the formula in question does not concern the so-called classic definition previously established and merely provides clarification with regard to proof. To realize this, it is sufficient and indeed necessary to re-read the entire passage in which these words are found:
‘Even if the defendant, as you have stated, has committed certain errors in selecting the basis for his calculations as is the case with regard to selection of the reference year and perhaps also with regard to amortization and the grouping of categories of coal, it is not to be held that its errors constitute ipso facto proof of misuse of powers unless it has also been established objectively that the High Authority pursued in this case, through a serious lack of care or attention amounting to a disregard for the lawful aim, purposes other than those for which the powers provided for in Article 26 (2) (a) were conferred (Rec. 1955-1956, pp. 309-310).’
This means, apart from establishing that errors do not in themselves (ipso facto as the Court has stated) constitute proof of misuse of powers, but rather that if those errors are such — by their nature, seriousness and, in all, ‘inexcusable’ character — that it cannot reasonably be believed that they were really committed in pursuit of the legal aim, for they would then presuppose (which cannot be presumed with regard to an administrative authority) a ‘serious lack of care or attention’, that there is proof that the authority really pursued an objective other than the legal aim for if this were not so its attitude would be incomprehensible.
With regard to the application of the foregoing to the present case I shall submit the following observations.
First of all with regard to Article 4 of the Treaty, which contains the prohibitions, I consider that misuse of powers cannot be envisaged. If the High Authority, in pursuing the objectives of Article 3 as it is bound to do under Article 53 infringed the prohibitions of Article 4 this means that it has infringed the provisions of the said article, not that it has committed misuse of powers. As I have already had occasion to note misuse of powers presupposes the existence in the exercise of powers of a measure of discretion: this cannot obtain with regard to a legal prohibition.
On the other hand with regard to Article 3, which is based entirely on the concept of the objective, since it lists the tasks of the Community, misuse of powers must be admitted in so far as it is established that the objectives therein lawfully defined have not in fact been pursued, with the exception of any reconciliation, as I have said. The High Authority indeed concedes this.
Nevertheless it makes an exception in the case of one of the objectives of Article 3, that in subparagraph (b): to ‘ensure that all comparably-placed consumers in the Common Market have equal access to the sources of production’ claiming that it constitutes a rule of law which merely sets out the principle of non-discrimination and which is reincorporated into Article 4 (b). I cannot agree with the defendant in this matter. No doubt, as I have already had occasion to observe, the scope of Article 3 (b) entirely covers that of Article 4 including subparagraph (b). Nevertheless it is not certain that the legal scope of two provisions, namely 3 (b) and 4 (b) is the same. This is indeed the view of Mr Paul Reuter, who considers that Article 3 (b) ‘does not readily lend itself to differences of degree, since it reaffirms a particularly important example of non-discrimination’ (op. cit. p. 43). Nevertheless it appears that this opinion was not shared by Mr Demaria, the distinguished Rapporteur of the Fifth Committee in the Congress at Stresa, who drew a clear distinction, considering both as ‘supreme principles’, one constituting the principle of non-discrimination and the other the principle of comparability (p. 50 et seq.).
Above all whatever opinion may be entertained in this matter by legal writers it none the less remains that with regard to the matter in hand each of the two provisions has a different scope since one concerns the rule as such, defining it and making provision for a prohibition (this is Article 4) whilst the other (Article 3 (b)) describes the rule as one of the objectives to be pursued by the institutions of the Community. Accordingly if the High Authority, acting ‘within the limits of its powers’ deliberately disregarded the objective laid down in Article 3 (b) it has committed misuse of powers (subject to the reservations I have already made regarding any reconciliation of opposing requirements which may be necessary). In such a case infringement of the Treaty pursuant to Article 4 (b) probably overlaps misuse of powers pursuant to Article 3 (b) but this clearly does not preclude the admissibility of the submission of misuse of powers, the only submission upon which undertakings can rely against general decisions.
It should not be urged against my view that to extend the scope of misuse of powers too far would be contrary to the intentions of the authors of the Treaty, a matter with which the Court was concerned in its first judgment in Case 8/55 (Rec. 1955-1956, pp. 226 and 227): in fact the significance of the submission of misuse of powers in the Treaty is quite simply dependent upon the number of cases in which the Treaty itself prescribes the pursuit of an objective as a condition of lawfulness: such cases are indeed frequent.
So much for Article 3.
With regard to what I have termed the ‘specific provisions’, these provisions relate rather to misuse of procedure which, moreover, seems to me more difficult to envisage with regard to Article 54 on investments than with regard to Article 59 on shortage.
On the other hand I can quite easily envisage misuse of powers with regard to Article 65: for example the High Authority, in order to avoid undertaking the responsibility for an authorization under Article 65 might prefer to authorize an agreement between undertakings in the form of a financial arrangement, or render obligatory by recourse to Article 53 (b) an arrangement containing the same conditions.
Since amongst the articles of the Treaty upon which the applicants rely are those in connexion with which it appears that misuse of powers may be invoked, I must further consider which of the applicants can be alleged to be affected by misuse of powers through the contested part of Decision No 2/57.
It appears that this question may be settled easily on the basis of the case-law of the Court.
A distinction must be drawn between undertakings and associations of undertakings.
With regard to undertakings it was held in the judgment of the Court of 16 July 1956 in Case 8/55 that ‘the phrase “affecting them” can only be understood in the sense of the words which express it, that is, where it concerns an undertaking which is the subject or at any rate the victim of the misuse of powers alleged by that undertaking’ (Rec.1955-1956, p. 226). In fact the right to submit an application for the annulment of a general decision on the ground of misuse of powers affecting an undertaking is ‘an exception explained by the fact that in this case it is still the individual factor which prevails’ (judgment in Case 8/55, Rec. 1955-1956, p. 227).
With regard to associations of undertakings I think that the second judgment, of 29 November 1956, in Case 8/55 provides the best guidance although it does not contain a general statement of principle. In fact we see in particular at page 306 of the Recueil (1955-1956) that the misuse of powers, whose existence the Court considered, was committed whilst the High Authority was pursuing the objectives of Article 26 of the Convention in connexion with ‘the fixing of prices of Belgian coal’. This accordingly means that, if the misuse of powers had been found it would have affected the Fédération des Charbonnages de Belgique which represents the interests as a whole of Belgian coal-producing undertakings. It is thus necessary with regard to such association to recognize a collective interest, the defence of which normally pertains to the relevant association and which the decision directly affects through the misuse of powers by which the latter is alleged to be vitiated. In this connexion I concur with the view expressed by the High Authority in its defence in Case 13/57 (paragraph 11), particularly with regard to its analysis of the case-law of the Court. Nevertheless I disagree with it on one point: I consider that the association may properly institute proceedings even if the interests of its members differ or are indeed opposed with regard to a specific point or to a specific provision of the contested decision; in my opinion it is sufficient that all (or at least a significant part of the undertakings) should have an interest in the annulment of the decision. If those ideas are applied it will be admitted that the proceedings may be instituted by associations of undertakings, both those which contain the steel undertakings as a whole of an entire country (Cases 8/57, 9/57 and 13/57) and the Chambre Syndicale du Centre-Midi which is restricted to a region in France.
On the other hand I do not consider that this applies to the individual applications, namely those by Ugine (Case 10/57), Aubert and Duval (Case 11/57) and the four German undertakings which are joint applicants in Case 13/57. In fact whatever the particular situation of those various undertakings and the different effects which the contested decision has for each of them it is quite clear that none of them, taken individually, was the object of even the victim of a misuse of power. If misuse of powers was committed it would have affected, for example, producers of special steels or works using certain plant, or, further, plant put into operation after 31 January 1958 but not affecting undertaking X … or undertaking Y … The individual factor which must prevail in accordance with the judgment of the Court in Case 8/55 is not present here. With regard to the application in Case 13/57 this is expressly recognized: it is stated in the application, paragraph 40, that the applicant at 1. (namely, the Syndicat) adopts the statement of reasons of the applicants at 2. to 5. (namely, the four undertakings) and refers thereto. Many of its members are undertakings in an identical or similar situation to that of the applicants at 2. to 5. It remains for me in conclusion to comment briefly on the two points relating specifically to Case 13/57.
The first point is whether the joint application submitted, on the one hand, by the Syndicat and, on the other, by the four undertakings which compose it, is admissible. In this connexion two doubts arise not so much from the sole fact that the legal interest in taking proceedings which the various applicants have may not be exactly the same but rather that the nature of this interest may lead, as we have seen, to different views precisely regarding the admissibility of the applications of the individual applicants.
Nevertheless I should rather be inclined to overrule this objection. In fact it is certain that in the present case the conditions for a joinder of applications (if a number of them had been submitted) would have been fulfilled: the applicants all contest the same decision on the same points and rely upon the same submissions. Although the Court, of course, is not obliged to join those applications it may do so. I consider that the requirements for justifying joinder also provide justification for submitting a single application: no doubt in certain of the countries in the Common Market more stringent conditions are laid down for the admissibility of a joint application than for ordering the joinder of several applications but that is principally connected with tax considerations of which we cannot take cognizance in this case.
The second question relating specifically to the application in Case 13/57 concerns the character, general or individual, of the contested decision.
Of all the applicants only those in Case 13/57 maintain that Decision No 2/57 must be considered as a group of individual decisions thereby permitting them to rely upon complaints of infringement of the Treaty and not only of misuse of powers. It is maintained that this individual character is established on the basis of three points: first because of the fact that the various provisions of the decision each affect a quite specific group of undertakings ‘the number of which cannot be increased’ (for example the undertakings referred to in Article 6 (2) and (3) which put into operation between 1 February 1957 and 31 January 1958 new plant within the meaning of the said Article 6); secondly by the fact that the supplementary rate is in the nature of a penalty; thirdly by the fact that Article 13 of the decision requires the undertakings which are members of the OCCF and of the CPFI to amend the statutes of those institutions. In each of those three cases the number of persons concerned is clearly limited.
This argument cannot be sustained. The judgment of the Court in Case 8/55 ruled against it so definitely that I consider it pointless to continue further. Decision No 2/57 indeed constitutes a general decision of a legislative nature.
I should like to recall as a final point that one of the applicants in Case 13/57, the undertaking Ruhrstahl of Hattingen, withdrew from the proceedings. The reasons for this are set out in the declaration of withdrawal but no condition is made: it is an outright withdrawal of which the Court should take official note. Since it relates to an application for annulment it is not at all necessary to obtain the concurrence of the defendant (Article 81 (2) of the Rules of Procedure).
I am accordingly of the opinion:
that official note should be taken of the withdrawal of the undertaking Ruhrstahl of Hattingen;
that the applications should be dismissed;
that the costs should be borne by the applicants, each of them bearing its share thereof.
(
1
)	Translated from the French.
(
2
)	Translator's note. In the French version of the Treaty the word “promouvoir” is used in subparagraphs (e), (f) and (g) and the word “assurer” in subparagraph (b) of Article 3. In subparagraphs (a), (c) and (d) the words “veiller à” are used. In the English version “promouvoir” is translated by “promote” and both “assurer” and “veiller à” by “ensure”.
(
3
)	‘Les Grands Arrêts de la Jurisprudence Administrative’, Sirey, Paris, 1956, p. 326.