Judgment of the Court (Second Chamber) of 7 April 1987. - Dillinger Hüttenwerke AG v Commission of the European Communities. - Adjustment of steel quotas - Relationship with the rules for aids. - Case 226/85.



European Court reports 1987 Page 01621



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

++++

ECSC - PRODUCTION - SYSTEM OF STEEL PRODUCTION QUOTAS - GRANT OF SUPPLEMENTARY QUOTAS TO RESTRUCTURED UNDERTAKINGS - UNDERTAKING ELIGIBLE FOR AIDS HAVING REGARD TO RULES FOR AID - EXCLUSION

( ECSC TREATY, ART . 58; GENERAL DECISIONS NOS 2320/81, ART . 2*(1 ), AND 234/84, ARTS 14A AND 14B )

Summary

ARTICLES 14A AND 14B OF GENERAL DECISION NO 234/84 ON THE GRANT OF SUPPLEMENTARY PRODUCTION QUOTAS MUST BE APPLIED AND INTERPRETED IN THE LIGHT OF THE RULES FOR AIDS . ARTICLE 14B IS INTENDED TO ENCOURAGE UNDERTAKINGS TO PROCEED RAPIDLY WITH THE CLOSURES REQUIRED BY THE RESTRUCTURING PLAN WHICH WAS APPROVED BY THE COMMISSION AND COULD THEREFORE GIVE RISE TO THE GRANT OF AID, WHILST ARTICLE 14A IS DESIGNED TO PROVIDE A DEGREE OF COMPENSATION FOR THOSE UNDERTAKINGS WHICH HAVE ALREADY BEEN RESTRUCTURED, DO NOT THEREFORE REQUIRE RESTRUCTURING IN ORDER TO BE VIABLE AND, ACCORDINGLY, DO NOT QUALIFY FOR AUTHORIZATION FOR AID TO BE GRANTED .

FOR THAT REASON, AND DESPITE THE DIFFERENCES OF WORDING AS BETWEEN THE VARIOUS LANGUAGE VERSIONS, THE CRITERION OF VIABILITY, WHICH IS A PRECONDITION FOR THE APPLICATION OF ARTICLE 14A OF DECISION NO 234/84, MUST BE INTERPRETED IN THE SAME WAY AS THE CRITERION ON WHICH THE RULES FOR AIDS ARE BASED IN THE FIRST INDENT OF ARTICLE 2*(1 ) OF GENERAL DECISION NO 2320/81, ACCORDING TO WHICH THE RESTRUCTURING PROGRAMME OF THE RECIPIENT UNDERTAKING MUST BE CAPABLE OF "MAKING IT FINANCIALLY VIABLE WITHOUT AID ".

IT FOLLOWS THAT AN UNDERTAKING WHICH IS DEEMED TO SATISFY THE CRITERIA FOR AUTHORIZATION FOR AID TO BE GRANTED CANNOT RECEIVE AN ADDITIONAL QUOTA UNDER ARTICLE 14A OF DECISION NO 234/84 .

Parties

IN CASE 226/85

DILLINGER HUETTENWERKE AG, A COMPANY GOVERNED BY GERMAN LAW, WHOSE REGISTERED OFFICE IS AT DILLINGEN ( SAARLAND ), REPRESENTED BY MESSRS DERINGER, TESSIN, HERRMANN AND SEDEMUND, RECHTSANWAELTE, COLOGNE, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE CHAMBERS OF J . LOESCH, 2 RUE GOETHE,

APPLICANT,

V

COMMISSION OF THE EUROPEAN COMMUNITIES, REPRESENTED BY ITS LEGAL ADVISER, R . WAEGENBAUER, ACTING AS AGENT, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF G . KREMLIS, A MEMBER OF ITS LEGAL DEPARTMENT, JEAN MONNET BUILDING, KIRCHBERG,

DEFENDANT,

APPLICATION FOR A DECLARATION THAT THE COMMISSION DECISION OF 12 JUNE 1985 REFUSING TO APPLY TO THE APPLICANT ARTICLE 14A OF COMMISSION DECISION NO 234/84/ECSC OF 31 JANUARY 1984 ON THE EXTENSION OF THE SYSTEM OF MONITORING AND PRODUCTION QUOTAS FOR CERTAIN PRODUCTS OF UNDERTAKINGS IN THE STEEL INDUSTRY ( OFFICIAL JOURNAL 1984, L* 29, P . 1 ) IS VOID,

THE COURT ( SECOND CHAMBER )

COMPOSED OF : T.*F . O' HIGGINS, PRESIDENT OF THE CHAMBER, O . DUE AND K . BAHLMANN, JUDGES,

ADVOCATE GENERAL : J.*L . DA CRUZ VILACA

REGISTRAR : S . HACKSPIEL, ADMINISTRATOR,

HAVING REGARD TO THE REPORT FOR THE HEARING AND FURTHER TO THE HEARING ON 23 OCTOBER 1986, AT WHICH DILLINGER HUETTENWERKE AG WAS REPRESENTED BY J . SEDEMUND AND THE COMMISSION WAS REPRESENTED BY ITS LEGAL ADVISER, R . WAEGENBAUER, ASSISTED BY A . PETERSEN, AS EXPERT,

AFTER HEARING THE OPINION OF THE ADVOCATE GENERAL DELIVERED AT THE SITTING ON 5 FEBRUARY 1987,

GIVES THE FOLLOWING

JUDGMENT

Grounds

1 BY APPLICATION LODGED AT THE COURT REGISTRY ON 23 JULY 1985, DILLINGER HUETTENWERKE AG, A STEEL UNDERTAKING WHOSE REGISTERED OFFICE IS AT DILLINGEN ( SAARLAND ), FEDERAL REPUBLIC OF GERMANY, BROUGHT AN ACTION UNDER THE SECOND PARAGRAPH OF ARTICLE 33 OF THE ECSC TREATY FOR THE ANNULMENT OF THE INDIVIDUAL DECISION OF THE COMMISSION ADOPTED ON 12 JUNE 1985 AND VALID UNTIL THE END OF THE SECOND QUARTER OF 1985, BY VIRTUE OF WHICH ARTICLE 14A OF GENERAL COMMISSION DECISION NO 234/84/ECSC OF 31 JANUARY 1984 ON THE EXTENSION OF THE SYSTEM OF MONITORING AND PRODUCTION QUOTAS FOR CERTAIN PRODUCTS OF UNDERTAKINGS IN THE STEEL INDUSTRY ( OFFICIAL JOURNAL 1984, L*29, P . 1 ) WAS DECLARED INAPPLICABLE TO IT .

2 ARTICLE 14A*(1 ) AND ( 2 ) OF THAT GENERAL DECISION, WHICH THE APPLICANT SOUGHT TO HAVE APPLIED FOR THE WHOLE OF 1984 AND FOR THE FIRST TWO QUARTERS OF 1985, ENABLES THE COMMISSION TO GRANT TO UNDERTAKINGS WHICH MAKE AN APPLICATION TO THAT EFFECT AN ADJUSTMENT TO THE QUOTAS IN A GIVEN CATEGORY OF PRODUCTS, WHERE THE COMMISSION ESTABLISHES, AT THE BEGINNING OF A QUARTER, THAT STEEL PLANT CLOSURES HAVE HAD THE EFFECT, FOR THAT CATEGORY OF PRODUCTS, OF INCREASING BY AT LEAST 5% THE RATIO BETWEEN THE REFERENCE PRODUCTION OF ALL THE UNDERTAKINGS COVERED BY THE QUOTA SYSTEM AND THEIR PRODUCTION POTENTIAL ON 1 OCTOBER 1982 .

3 UNDER ARTICLE 14A*(4 ), AN UNDERTAKING MAY BE GRANTED AN INCREASE IN QUOTAS ONLY IF, IN PARTICULAR :

"...

ITS VIABILITY IS ASSURED WITHOUT STRUCTURAL ADJUSTMENT,

...".

4 ACCORDING TO THE CONTESTED DECISION, THE REASONS FOR THE REFUSAL TO APPLY THAT PROVISION TO THE APPLICANT WERE AS FOLLOWS :

"WHERE THE CONDITIONS LAID DOWN IN ARTICLE 14A OF DECISION NO 234/84/ECSC ARE SATISFIED, THE COMMISSION MAY GRANT CERTAIN ADDITIONAL QUOTAS . THE LATTER HOWEVER PRESUPPOSE THAT THE UNDERTAKING IN QUESTION HAS ALREADY BEEN RESTRUCTURED AND THEREFORE NO LONGER NEEDS AID .

THE COMMISSION WAS INFORMED OF YOUR PROPOSED RESTRUCTURING BY A LETTER DATED 30 JANUARY 1984 . THE PLAN PROVIDES FOR THE CLOSURE OF PRODUCTION PLANTS IN 1985 AND FOR THE GRANT OF AID . IT IS THEREFORE NOT POSSIBLE TO SAY THAT YOUR UNDERTAKING HAS ALREADY BEEN RESTRUCTURED ."

5 IN THAT SECOND PARAGRAPH, THE COMMISSION IS REFERRING TO A STRUCTURAL PROGRAMME PROPOSED BY THE APPLICANT IN RESPECT OF WHICH THE COMMISSION, BY LETTER OF 2 MAY 1984 TO THE GOVERNMENT OF THE FEDERAL REPUBLIC OF GERMANY, AUTHORIZED THE GRANT OF INVESTMENT AID SUBJECT TO THE CONDITION THAT THE APPLICANT' S SHEET STEEL PRODUCTION CAPACITY SHOULD BE REDUCED BY 360*000 TONNES BY TAKING A ROLLING MILL OUT OF SERVICE . IN ITS LETTER, THE COMMISSION CITED THE FOLLOWING CONSIDERATION AS ONE OF THE REASONS FOR THE AUTHORIZATION :

"THE COMMISSION CONSIDERS, ON THE BASIS OF THE INFORMATION PROVIDED BY THE UNDERTAKING IN RESPONSE TO THE COMMISSION' S FINANCIAL QUESTIONNAIRE, THAT THERE IS A STRONG POSSIBILITY THAT, UNDER NORMAL MARKET CONDITIONS, DILLINGER HUETTENWERKE AG WILL BE ABLE TO RESTORE ITS FINANCIAL VIABILITY BETWEEN NOW AND 1986 WITHOUT FURTHER AID ."

6 THE COMMISSION GRANTED THAT AUTHORIZATION UNDER GENERAL COMMISSION DECISION NO 2320/81 OF 7 AUGUST 1981 ESTABLISHING COMMUNITY RULES FOR AIDS TO THE STEEL INDUSTRY ( THE "AIDS CODE", OFFICIAL JOURNAL 1981, L*228, P . 14 ). THE FIRST INDENT OF ARTICLE 2*(1 ) OF THAT DECISION REQUIRES THE RESTRUCTURING PROGRAMME OF THE UNDERTAKING IN QUESTION TO BE CAPABLE OF RESTORING ITS COMPETITIVENESS AND OF MAKING IT FINANCIALLY VIABLE WITHOUT AID UNDER NORMAL MARKET CONDITIONS .

7 THE APPLICANT CLAIMS THAT THE CONTESTED DECISION IS BASED ON AN ERRONEOUS INTERPRETATION OF ARTICLE 14A OF DECISION NO 234/84, IN SO FAR AS THE PRECONDITION FOR ITS APPLICABILITY IS NOT THAT THE UNDERTAKING SHOULD HAVE BEEN RESTRUCTURED ALREADY BUT RATHER THAT ITS VIABILITY SHOULD BE ASSURED WITHOUT STRUCTURAL ADJUSTMENT . MOREOVER, IT CLAIMS THAT THE STATEMENT OF THE REASONS FOR THE DECISION IS INADEQUATE, SINCE, IN APPRAISING THE VIABILITY OF THE APPLICANT UNDERTAKING, THE COMMISSION CONSIDERED NEITHER ITS GENERAL FINANCIAL SITUATION NOR THE NATURE OF THE PLANNED RESTRUCTURING MEASURES, NOR THE NATURE OF THE AID APPLIED FOR . HAD IT DONE SO, IT WOULD HAVE FOUND THAT THE VIABILITY OF THE APPLICANT WAS FULLY ASSURED WITHOUT STRUCTURAL ADJUSTMENT AND THAT THE FUNCTION OF THE RESTRUCTURING WAS MERELY TO MAINTAIN ITS COMPETITIVENESS .

8 THE APPLICANT CLAIMS IN PARTICULAR THAT THE COMMISSION MAY NOT BASE ITS APPRAISAL ON THE SAME CRITERIA AS THOSE WHICH IT EMPLOYS, UNDER THE RULES FOR AIDS, WHEN ASSESSING WHETHER THE RESTRUCTURING OF THE UNDERTAKING SEEKING THE AID IS CAPABLE OF RE-ESTABLISHING ITS COMPETITIVENESS AND MAKING IT FINANCIALLY VIABLE WITHOUT AID UNDER NORMAL MARKET CONDITIONS . IN THAT CONNECTION, THE APPLICANT STATES THAT, WHILST THE FRENCH VERSIONS OF DECISION NO 234/84 AND OF THE RULES FOR AIDS USE RESPECTIVELY THE WORDS "VIABILITE" AND "FINANCIEREMENT VALABLE", THE GERMAN VERSION OF THE RULES FOR AIDS SPEAKS OF "RENTABILITAET" ( PROFITABILITY ), WHICH IS A CONCEPT FAR REMOVED FROM THAT OF "LEBENSFAEHIGKEIT" ( VIABILITY ), THE TERM USED IN ARTICLE 14A OF DECISION NO 234/84 . FOR THE PURPOSE OF CONSIDERING WHETHER THE LATTER CONDITION IS SATISFIED, THERE IS NO JUSTIFICATION FOR REQUIRING, AS DOES THE COMMISSION UNDER THE RULES FOR AIDS, A MINIMUM RETURN OF 3.5% ON CAPITAL AND RESERVES, SINCE, FOR THE APPLICANT' S SHAREHOLDERS, A LOWER RETURN IS PREFERABLE TO LIQUIDATION OF THE COMPANY .

9 THE COMMISSION STATES THAT ARTICLE 14A OF DECISION NO 234/84 WAS INSERTED BY COMMISSION DECISION NO 2177/83/ECSC OF 28 JULY 1983 ON THE EXTENSION OF THE SYSTEM OF MONITORING AND PRODUCTION QUOTAS FOR CERTAIN PRODUCTS OF UNDERTAKINGS IN THE STEEL INDUSTRY ( OFFICIAL JOURNAL 1983, L*208, P . 1 ). ACCORDING TO THE RECITALS IN THE PREAMBLE TO THE LATTER DECISION, THE PROVISION COVERS "UNDERTAKINGS WHICH HAVE ALREADY BEEN RESTRUCTURED AND HENCE NO LONGER RECEIVE AID ". ITS PURPOSE IS TO PREVENT THOSE UNDERTAKINGS FROM BEING PLACED AT A DISADVANTAGE BY COMPARISON WITH UNDERTAKINGS GRANTED ADDITIONAL QUOTAS UNDER ARTICLE 14B OF THE DECISIONS CITED ABOVE WHICH SERVES TO ENCOURAGE THE LAST-MENTIONED UNDERTAKINGS TO PROCEED RAPIDLY WITH NECESSARY RESTRUCTURING . THE APPLICATION OF ARTICLE 14A OF DECISION NO 234/84 IS THEREFORE CLOSELY LINKED WITH THE RULES FOR AIDS, SINCE THE MEMBER STATES CAN GRANT AIDS ONLY IN RESPECT OF RESTRUCTURING MEASURES WHICH ENABLE THE VIABILITY OF THE UNDERTAKING IN QUESTION TO BE RESTORED AND, THEREFORE, ONLY TO UNDERTAKINGS WHOSE VIABILITY IS NOT ASSURED WITHOUT SUCH MEASURES . IN THE COMMISSION' S OPINION, IT FOLLOWS THAT IF AIDS ARE GRANTED ARTICLE 14A, OF DECISION NO 234/84 CANNOT BE APPLIED .

10 THE COMMISSION ALSO OBSERVES THAT, UNDER THE RULES FOR AIDS, THE APPRAISAL OF AN UNDERTAKING' S VIABILITY INVOLVES A STATISTICAL STUDY BASED ON PRECISE CRITERIA . ACCORDING TO THAT METHOD, IF AN UNDERTAKING IS TO BE VIABLE ITS PROFITS MUST BE SUFFICIENT TO COVER ALL EXPENSES, INCLUDING DEPRECIATION AND FINANCIAL CHARGES, AND PROVIDE A RETURN OF AT LEAST 3.5% ON CAPITAL AND RESERVES . THE APPRAISAL OF THE APPLICANT' S VIABILITY IN ACCORDANCE WITH THOSE CRITERIA CARRIED OUT WHEN ITS RESTRUCTURING PLAN WAS EXAMINED SHOWED THAT BY VIRTUE OF THE PLANNED RESTRUCTURING AND THE AID APPLIED FOR, THE UNDERTAKING COULD BE REGARDED AS JUST VIABLE . THE APPLICANT COULD THEREFORE RECEIVE THE AID BUT, FOR THAT SAME REASON, WOULD NOT BE ENTITLED TO AN ADDITIONAL QUOTA UNDER ARTICLE 14A OF DECISION NO 234/84 .

11 REFERENCE IS MADE TO THE REPORT FOR THE HEARING FOR AN ACCOUNT OF THE FACTS OF THE CASE AND THE ARGUMENTS OF THE PARTIES, WHICH ARE MENTIONED OR DISCUSSED HEREINAFTER ONLY IN SO FAR AS IS NECESSARY FOR THE REASONING OF THE COURT .

12 IT MUST BE STATED IN THE FIRST PLACE THAT, AS THE COURT HELD IN ITS JUDGMENTS OF 15 JANUARY 1985 ( CASE 250/83 FINSIDER V COMMISSION, (( 1985 )) ECR 131 ) AND OF 15 OCTOBER 1985 ( JOINED CASES 211 AND 212/83 AND 77 AND 78/84 KRUPP STAHL AG AND THYSSEN STAHL AG V COMMISSION (( 1985 )) ECR 3409 ), THE QUOTA SYSTEM AND THE RULES FOR AIDS PURSUE A COMMON AIM, NAMELY THE RESTRUCTURING NEEDED TO ADAPT PRODUCTION AND CAPACITY TO FORESEEABLE DEMAND AND TO RE-ESTABLISH THE COMPETITIVENESS OF THE EUROPEAN STEEL INDUSTRY, AND IT IS THEREFORE NEITHER ARBITRARY NOR DISCRIMINATORY THAT THE INFORMATION OBTAINED FROM THE APPLICATION OF EITHER OF THOSE SYSTEMS SHOULD BE AVAILABLE FOR USE AS A REFERENCE IN THE OTHER .

13 IT FOLLOWS THAT THE RULES ON QUOTAS AND THE RULES FOR AIDS, WHICH FORM A COHERENT WHOLE, MUST EACH BE INTERPRETED AND APPLIED HAVING REGARD TO THE OTHER . THAT APPLIES PARTICULARLY TO ARTICLES 14A AND 14B OF DECISION NO 234/84 WHICH, AS THE APPLICANT ITSELF HAS CONCEDED, BEAR A CLOSE RELATIONSHIP WITH THE RULES FOR AIDS .

14 IT IS APPARENT FROM THE SCHEME OF THOSE TWO ARTICLES AND FROM THE RECITALS IN THE PREAMBLE TO DECISION NO 2177/83, IN WHICH THEY ARE BROUGHT TOGETHER FOR THE FIRST TIME, THAT ARTICLE 14B IS INTENDED TO ENCOURAGE UNDERTAKINGS TO PROCEED RAPIDLY WITH THE CLOSURES REQUIRED BY THE RESTRUCTURING PLAN WHICH WAS APPROVED BY THE COMMISSION AND COULD THEREFORE GIVE RISE TO THE GRANT OF AID, WHILST ARTICLE 14A IS DESIGNED TO PROVIDE A DEGREE OF COMPENSATION FOR THOSE UNDERTAKINGS WHICH HAVE ALREADY BEEN RESTRUCTURED, DO NOT THEREFORE REQUIRE RESTRUCTURING IN ORDER TO BE VIABLE AND, ACCORDINGLY, DO NOT QUALIFY FOR AUTHORIZATION FOR AID TO BE GRANTED .

15 FOR THAT REASON, AND DESPITE THE DIFFERENCES OF WORDING AS BETWEEN THE VARIOUS LANGUAGE VERSIONS, THE CRITERION OF VIABILITY, WHICH IS A PRECONDITION FOR THE APPLICATION OF ARTICLE 14A OF DECISION NO 234/84, MUST BE INTERPRETED IN THE SAME WAY AS THE CRITERION ON WHICH THE RULES FOR AIDS ARE BASED IN THE FIRST INDENT OF ARTICLE 2*(1 ) OF DECISION NO 2320/81 . IT FOLLOWS THAT AN UNDERTAKING WHICH, AS IN THE APPLICANT' S CASE, IS DEEMED TO SATISFY THE CRITERIA FOR AUTHORIZATION FOR AID TO BE GRANTED CANNOT RECEIVE AN ADDITIONAL QUOTA UNDER ARTICLE 14A OF DECISION NO 234/84 .

16 IT IS OF NO IMPORTANCE, IN THAT CONNECTION, THAT THE COMMISSION, FOR THE PURPOSE OF CONSIDERING WHETHER AID MAY BE AUTHORIZED FOR A RESTRUCTURING PLAN, REQUIRES THAT, WHEN IMPLEMENTED, THE PLAN SHOULD BE ABLE IN ALL PROBABILITY TO ENSURE A RETURN OF AT LEAST 3.5% ON THE CAPITAL AND RESERVES OF THE UNDERTAKING UNDER NORMAL MARKET CONDITIONS . SUCH A METHOD OF CALCULATION IS WITHIN THE MARGIN OF DISCRETION WHICH THE COMMISSION MUST BE RECOGNIZED AS ENJOYING IN THAT REGARD .

17 IN THE STATEMENT OF REASONS ON WHICH THE CONTESTED DECISION WAS BASED, THE COMMISSION INDICATED THE SCOPE OF ARTICLE 14A OF DECISION NO 234/84, USING WORDS SIMILAR TO THOSE USED IN THE PREAMBLE TO DECISION NO 2177/83, AND IT EXPLAINED THAT THE APPLICANT UNDERTAKING DID NOT FALL WITHIN THE TERMS THEREOF BY REASON OF THE RESTRUCTURING PLAN WHICH PROVIDED FOR THE CLOSURE OF PLANT AND THE GRANT OF AID . BY STATING THOSE REASONS, THE COMMISSION PROVIDED THE INFORMATION NECESSARY FOR THE APPLICANT TO DETERMINE THE GROUNDS ON WHICH ITS APPLICATION WAS REJECTED AND FOR THE COURT TO VERIFY THE LEGALITY OF THAT REJECTION . IT FOLLOWS THAT THE STATEMENT OF REASONS ON WHICH THE CONTESTED DECISION WAS BASED, DESPITE BEING VERY SUCCINCT, CANNOT BE REGARDED AS INADEQUATE .

18 THE APPLICATION MUST THEREFORE BE DISMISSED AS UNFOUNDED .

Decision on costs

COSTS

19 UNDER ARTICLE 69*(2 ) OF THE RULES OF PROCEDURE, THE UNSUCCESSFUL PARTY IS TO BE ORDERED TO PAY THE COSTS . SINCE THE APPLICANT HAS FAILED IN ITS SUBMISSIONS, IT MUST BE ORDERED TO PAY THE COSTS .

Operative part

ON THOSE GROUNDS,

THE COURT ( SECOND CHAMBER )

HEREBY :

( 1 ) DISMISSES THE APPLICATION;

( 2 ) ORDERS THE APPLICANT TO PAY THE COSTS .