61982C0234
OPINION OF MR ADVOCATE GENERAL REISCHL
DELIVERED ON 26 OCTOBER 1983 (
1
)
Mr President,
Members of the Court,
The applicant in this case is a relatively small Italian undertaking which manufactures virtually nothing but concrete reinforcing bars, and does so — or at least it did at the time of the relevant facts — by processing semi-manufactured products on behalf of other persons.
In accordance with Commission Decision No 1831/81 (Official Journal 1981, L 180, p. 1), as amended by Commission Decision No 1832/81 (Official Journal 1981, L 184, p. 1), the Commission notified the applicant on 6 August 1981 that its production quota for the third quarter of 1981 in respect of Categories V and VI was 12729 tonnes. However, on verification it was discovered that the applicant had produced 13741 tonnes during that quarter, that is to say it exceeded its quota by 1012 tonnes.
By a letter of 25 February 1982 the Commission drew that fact to the applicant's attention and asked it for its comments thereon.
With regard to the allegation that it had exceeded its production quota, the applicant relied, in a statement dated 4 March 1982, on the fact that the Commission had not taken into account that the applicant had applied Article 11 (2) and (3) of Decision No 1831/81, which provide:
“2.
In the case of undertakings wich produce only one category, a tolerance of 3 % in excess of the part of their production quota which may be delivered on the common market shall be allowed within the limit of the production quota.
3.
Any undertaking which has not come to the end of its production quotas or of the part of its quotas which may be delivered on the common market may carry forward into the ensuing quarter up to 5 % of, as the case may be, their quotas or part of quotas for the same category of product.”
The applicant points out that its quota for the second quarter of 1981 was 13789 tonnes whilst it actually produced 11277 tonnes; thus, by virtue of Article 11 (3) of Decision No 1831/81, its production quota for the third quarter of 1981 should have been increased by 636 tonnes (that is to say, 5 % of 12729 tonnes). It further contends that, if the 3 % tolerance margin referred to in Article 11 (2) is added (that is to say 3 % of 12729 tonnes), the maximum permissible production rises to 13746 tonnes and accordingly the quota was not exceeded.
At a hearing on 4 June 1982 the applicant conceded that it had been in error in its application of the aforementioned Article 11 but was of the opinion that account must be taken of the fact that it had acted in good faith and that the excess production had been placed in storage. Finally, the applicant also pointed out in a letter of 21 June 1982 that it had not exceeded its quota in respect of 1981 as a whole and had in fact produced 1131 tonnes less than it was entitled to do and that that must also be taken into account in the application of the rules relating to penalties contained in Decision No 1831/81.
The Commission did not accept those arguments and -on 13 August 1982 it decided to impose a fine under Article 12 of Decision No 1831/81 in respect of the applicant's exceeding its production quota for Categories V and VI by 1012 tonnes. The decision imposed a fine of 75900 ECU (LIT 100284393), on the basis of the standard rate of 75 ECU per tonne of excess production, and declared that it was to be paid within two months of notification of the decision. It also provided that the fine would be increased by 1 % for each month that the sum remained outstanding.
On 17 September 1982 the applicant brought an action before the Court of Justice for a declaration that it is not required to pay the fine imposed upon it by the decision of 13 August 1982 or, in the alternative, for such á reduction in the amount of the fine as the Court thinks fit. In its reply the applicant also claimed in the alternative that the Court should declare that interest at the rate of 1 % per month was sufficient for fines imposed during 1982.
By order of the President of the Court of Justice of 15 March 1983. the enforcement of the contested decision was suspended until pronouncement of the final judgment. The applicant was not required to provide the usual bank guarantee.
1.
The applicant draws attention first to the fact that in 1981 as a whole it did not exceed its production quota.
That statement is correct inasmuch as the applicant remained — according to the figures produced to the Court — within its quotas for Category IV, which includes concrete reinforcing bars, in the first quarter of 1981 (by 29 tonnes) and in the second quarter (by 2512 tonnes). However, it is clearly not true in relation to the fourth quarter of 1981.
It must, in any event, be said, as I have already made clear in the opinion I delivered in Case 179/82, (
2
) that for the applicant to take into consideration the year as a whole does not enable it to conclude that it has not infringed the quota system, because that system is based clearly on quarterly quotas and it is the quarterly allocations which are decisive.
Nor is it possible to justify the applicant's breach of its quota simply by reference to the extent to which the quota for the previous quarter was not exhausted.
In that connection no account may be taken of Article 8 (2) of Decision No 2794/80 (Official Journal 1980, L 291, p. 1), which provides:
“Undertakings which have not yet exhausted their quotas may carry over to the following quarter up to 50% of the unused part of the quota.”
That possibility clearly only existed in the context of Decision No 2794/80 and therefore ceased to exist on 30 June 1981 when that decision expired (see Article 15 of Decision No 2794/80).
Nor is it possible — contrary to the view taken by the applicant in the reply, in modification of the view which it put forward at its hearing — to take account of Article 11 (3) of Decision No 1831/81, which I quoted earlier. The wording and general context of the decision alone make it clear that that provision only applies to quotas which were allocated pursuant to Decision No 1831/81, that is to say it only applies from the fourth quarter of 1981. Confirmation that that was the sole intention is to be found in the fact that the quota system was amended to a considerable extent in comparison with the previous decision, Decision No 2794/80, as regards the products affected and the quotas to be allocated in respect of those products. Whereas under Decision No 2794/80 quotas were fixed for products in Group I (hot-rolled wide and narrow strip) on the one hand and for products in Group IV (light sections [coiled wire rod, concrete reinforcing bars and other merchant bars]) on the other hand, under Decision No 1831/81 they were fixed in respect of various derived products falling within Group I (as listed in Article 1 of the decision) and the products falling within Group IV were divided into three groups (Categories IV, V and VI), separate quotas being fixed in respect of each category. The possibility of simply carrying forward into the third quarter of 1981 unused quotas from the second quarter of 1981 was in fact therefore excluded.
Thus the only possibility which remains — if excess production in the third quarter of 1981 cannot be justified by simply referring to underproduction of the relevant products in the second quarter of 1981 — is to treat the actual production situation as mitigating circumstances, as it were, and to take that into account when fixing the amount of the fine, for the specific reason that a change in the quota system prevented the continued application of the rule contained in Article 8 of Decision No 2794/80 in the following quarter, whereas Decision No 1831/81 contained an equivalent possibility with effect from the second quarter. I shall return to that question in another context.
2.
The applicant also contended, and charged the Commission with failure to take the fact into account, that it did not sell the excess production but placed it in storage because, as an undertaking which worked exclusively on behalf of others who remained the owners of the products, it had no access to the market.
In my opinion, that also provides no reason not to impose a fine.
The quota system clearly operates in relation to production and it is on production that restrictions are imposed, as is prescribed by Article 58 of the ECSC Treaty itself. There are logical reasons for that approach: the effectiveness of the system is ensured better in that way than if movements into and out of steel depots had to be monitored as well. Thus, in order to impose a fine, it is sufficient in principle to establish that production exceeded the amount permitted by the Commission: what happens to the products subsequently is irrelevant.
The applicant's contention that it had no access to the market and therefore experienced difficulties must, without doubt, be disregarded as regards the third quarter of 1981. In fact at that time the proportion of its quotas which it could dispose of within the common market had rightly not been fixed because it operated exclusively on behalf of others. That did not happen until the summer of 1982, when it informed the Commission that difficulties had arisen for it because the undertakings for which it worked were now carrying out the processing themselves; consequently, in November 1982 the Commission allocated additional delivery quotas to the applicant, as is provided for by Article 8 (3) of Decision No 1696/82.
3.
Thirdly, the applicant contends that if it has to pay the fine it will be forced to cease paying its debts and to close down its plant; such a consequence, which the Commission ought to avoid, does not accord with Article 3 of the ECSC Treaty, of which it specified paragraphs (a) and (d) in its reply. It also stated in its reply that the difficulties caused by the fine should have been taken into account in accordance with Articles 14 and 15 of Decision No 1831/81.
As regards that contention, it is possible to leave open the question whether the applicant has produced sufficient evidence to show that payment of the fine will have the consequences it fears. It has in fact relied on its balance sheet for 1981, a letter dated 18 November 1982 according to which its banks were not prepared to give it a guarantee in respect of payment of the fine and a shareholders' meeting at which the applicant's position in December 1982 was explained. The Commission regards such evidence as insufficient. In my opinion, the following considerations are decisive and lead to the conclusion that the applicant's argument cannot result in the annulment or amendment of the decision imposing a fine.
(a)
It is clear that the decision imposing a fine does not infringe Article 3 of the ECSC Treaty.
I am at a loss to understand what relevance Article 3 (a) has in that connection. Furthermore, even if the reference to paragraph (d) is not completely without foundation, the Commission has rightly pointed out, by reference to the relevant case-law, that it is not possible to pursue all the objectives laid down in Article 3 at the same time; instead it has a discretion to give priority to certain ones according to tie economic circumstances and it has certainly not been shown that it has abused its discretion in the light of the provisions cited by the applicant.
(b)
It must also be recognized that substantial fines are essential for the effectiveness of the quota system, which is intended to overcome a serious crisis and to create the conditions in which the objectives defined in Article 3 may be pursued effectively. If the matter is regarded in that light it is unreasonable to expect the Commission to impose no fine or only a very small one when an undertaking has considerable financial difficulties, because otherwise such undertakings could exceed their quotas virtually with impunity, which would amount to discrimination. Moreover, it would hardly be practicable to fix fines according to the financial situation of each particular undertaking. That would make the imposition of sanctions, and therefore the implementation of the quota system, unduly difficult.
Thus the Commission's declared readiness in cases of difficulty to allow an appropriate period for the payment of fines or to allow payment in instalments seems, in principle, to be sufficient.
(c)
As regards Articles 14 and 15 of Decision No 1831/81, which are also relied on by the applicant, it is quite clear that they are not relevant in this case.
In fact Article 14 only applies where an undertaking encounters exceptional difficulties as a result of the inadequacy of the quotas allocated to it. However, that has not been alleged by the applicant, which, on the contrary, has pleaded the difficulties which would arise on payment of the fine. Moreover, it has not made a request to the Commission under Article 14 as is required by that provision.
Article 15 relates to the situation where undertakings have modified their traditional deliveries to the point of no longer permitting a proper supply to the processors who depend on them. Accordingly it would have been possible — but only on the basis of a complaint and the applicant's letter of 4 March 1982 cannot, as such, be regarded as a complaint — to allocate additional quotas in respect of its suppliers in order to secure the processing work, if one ignores the fact that the semi-manufactured products needed for processing by the applicant were in any event apparently not covered by the quota system.
4.
In addition the applicant contends, as it did at its hearing, that even if it was not in fact possible to apply Article 11 (2) and (3) of Decision No 1831/81 in its case, it should at least be recognized that it took the view in good faith that it was entitled to increase its quota in accordance with those provisions. That amounts to nothing other than a submission that its failure to comply with the quota was due to an error of law which exonerates it from blame and precludes the imposition of a fine.
That argument cannot, however, be accepted in relation to Article 11 (2). It is quite clear from its wording that that provision is concerned not with the exceeding of production quotas but with the exceeding of delivery quotas, which were not even fixed for the applicant because it operated exclusively as a processor on behalf of others. The purpose of Article 11 (2) is also quite clear: it is to provide a method whereby, in relation to delivery quotas, a degree of flexibility may be introduced in respect of an undertaking which produces only one category of product and which cannot benefit from the tolerance margin provided for by Article 11 (1) in the event of excess production. Moreover, it is clear from Article 11 (1), which deals with the exceeding of production quotas, that whilst a tolerance margin is allowed for individual product categories the production of those categories as a whole may not exceed the sum of the quotas. Thus there can be no question of an excusable error of law in relation to Article 11 (2).
With regard to Article 11 (3), I note that that provision did not permit the carrying forward of the unused part of a quota from the second quarter of 1981 to the third quarter of that year. Furthermore, I am of the opinion that there could be no serious doubt, and therefore no relevant mistake of law, in that connection. However, if the necessary clarity did not exist for the applicant a simple enquiry addressed to the Commission would have provided it.
Therefore on account of that failure it is possible to place some responsibility on the applicant (its contention that the Commission's inspectors confirmed it in its view of Article 11 could not be substantiated) and that responsibility makes it impossible to regard its failure to comply with the quota as unimportant simply in the light of Article 11 (3) of Decision No 1831/81.
In this connection, however, I would like to add — returning to a matter I referred to earlier — that it seems appropriate to me to regard the fact that the applicant did not exhaust its production quota in the second quarter of 1981 at the very least as a. mitigating circumstance and that it would be reasonable to reduce the fine accordingly, at least by reference to the provision contained in Article 11 (3) of Decision No 1831/81 even if not to the extent of the generous provision contained in Article 8 (2) of Decision No 2794/80. That should be borne in mind because a carryover provision is a permanent part of each quota system and, as such, may have given rise to certain expectations that a similar rule would also apply in the transition from the original system to the succeeding one. It is particularly appropriate to adopt such an approach in a case such as this one, where, since the applicant only manufactures one product, there are no difficulties in making the calculation owing to the fact that the product groups adopted in Decision No 1831/81 differed somewhat from those adopted in the previous decision.
5.
Finally, two further points must be considered, to which the applicant did not refer in its application but which it raised in its reply. They concern the rate of interest payable by it and the maximum permissible fine, in particular in the light of Article 58 (4) of the ECSC Treaty, which provides:
“The High Authority may impose upon undertakings which do not comply with decisions taken by it under this Article fines not exceeding the value of the tonnages produced in disregard thereof.”
(a)
With regard to the first point, in respect of which, as I have shown, the applicant has submitted a specific claim, it argued that there is no clear decision on that matter and it must be inferred that the Commission intends to fix a variable rate of interest according to the country concerned, that is to say, intends to treat undertakings in different Member States differently.
On that point I can be brief. The contested decision states expressly that the fine will increase by 1% for each month that it remains outstanding, which amounts to an annual interest rate of 12% and not 22%, which was the rate the applicant feared would be applied to Italian undertakings. That is all that is important to the applicant and I can see no point in the Court's confirming once again that the Commission should adhere to that intention. Even if the Commission is considering varying the interest rate according to the country, there is no reason to examine the question now since it clearly concerns a draft decision which is still under scrutiny and which has, in any case, had no incidence on this case.
Thus it can be stated without further enquiry that there would appear to be no reason for including in the judgment the declaration desired by the applicant.
(b)
With regard to the second point, the applicant contended in a letter to the Court of 5 October 1982, and again in its reply, that the fine imposed on it is contrary to Article 58 (4) of the ECSC Treaty, according to which the value of the tonnages produced in disregard of the Commission's decision is decisive. That provision was allegedly infringed because it was necessary to take account of the fact that the excess tonnages, like all the applicants' production, were produced on behalf of others and that the owners of the materials to be processed remained owners of the finished product. Thus the upper limit for the fine should have been the payment made to it for its processing work, that is to say a maximum rate of 57 ECU per tonne should have been applied on the basis of an average payment to the applicant for its processing work in 1981 of LIT 75307 per kg.
The applicant's argument with regard to this point can hardly be accepted, leaving aside the question whether the submission made in its reply is inadmissible because it was made too late since the aforementioned letter to the Court was not signed by its legal representative.
In my opinion, there has been no infringement of Article 58 of the ECSC Treaty, which prescribes the maximum fines, because “the value of the tonnages” must be taken to mean from its clear wording the market value prior to marketing of the finished products to which the quota relates and not the value added by the person carrying out processing work. That construction is supported by considerations pertaining to the practicability of the system, which would be greatly reduced if the Commission had to ascertain the value s added in each case, because that would necessitate investigating the different processing stages and taking into account the different productivity of undertakings. However, since the value of the products at issue in this case is, as the Commission has shown, several times greater than the fine provided for in Article 12 of Decision No 1831/81, it is not possible to speak of an infringement of Article 58 of the ECSC Treaty.
Moreover, the Commission cannot be expected when fixing individual sanctions to take into account in each case the fact that undertakings such as the applicant only work on behalf of others and thereby, quite apart from the upper limit laid down in Article 58 of the ECSC Treaty, to satisfy the requirement of fairness. There is no justification for that since the fines which would normally be imposed were announced in the general decision governing the quota system and therefore every undertaking was aware, from the outset, what the risks of excess production were. A further important factor is that if the position were otherwise there would be discrimination against undertakings which carry out the same work as pure processors but to which the aforementioned consideration does not apply because they purchase semi-manufactured products and then sell the finished product on the market themselves. A final and not unimportant factor is the danger that the quota system might be circumvented and its effectiveness undermined by processors and their customers agreeing that any excess production should be ascribed to the latter rather than the former because lower fines would then be imposed.
6.
The position may be summarized as follows: If it is considered appropriate to take account of the fact that the applicant produced 2512 tonnes less than it was entitled to produce in the second quarter of 1981 and that it was not able to take advantage of that in the following quarter solely because the quota system was amended and if it is also borne in mind that the Commission, following a well established practice, waives the imposition of a fine where a quota is exceeded for the first time by less than 500 tonnes, there are grounds in this case not only for considerably reducing the fine imposed but even for holding that it was not appropriate to impose any fine at all. The applicant's principal claim should therefore be granted and consequently the Commission should be ordered to pay the costs, including the costs of the application for interim relief.
(
1
)	Translated from the German.
(
2
)	Judgment of 19 October 1983 in Case 179/82, Lucchini Siderurgica SpA v Commission [1983] ECR 3083.