Opinion of Mr Advocate General Geelhoed delivered on 8 February 2001. - Moccia Irme SpA, Ferriera Lamifer SpA and Ferriera Acciaieria Casilina SpA v Commission of the European Communities. - Appeal - Aid to the steel industry - Restructuring of the iron and steel sector. - Joined cases C-280/99 P to C-282/99 P.



European Court reports 2001 Page I-04717



Opinion of the Advocate-General

1. The present cases concern appeals by Moccia Irme SpA (Moccia), Ferriera Lamifer SpA (Ferriera) and Ferriera Acciaieria Casilina SpA (Casilina) against the judgment of the Court of First Instance of 12 May 1999 dismissing their actions for annulment of Commission Decisions 96/678/ECSC of 30 July 1996 and 97/258/ECSC of 18 December 1996 concerning aid for closures envisaged by Italy as part of the restructuring of its private steel industry (hereinafter Decision 96/678 and Decision 97/258).

I - Community law

2. I set out below the relevant provisions of Community law, as described in the judgment appealed against.

3. Article 4(c) of the ECSC Treaty provides:

The following are recognised as incompatible with the common market for coal and steel and shall accordingly be abolished and prohibited within the Community, as provided in this Treaty:

...

(c) subsidies or aids granted by States, or special charges imposed by States, in any form whatsoever;

...

4. Under the first paragraph of Article 95 of the ECSC Treaty, the Commission adopted Decision No 257/80/ECSC of 1 February 1980 establishing Community rules for specific aids to the steel industry. This decision is commonly referred to as the First Steel Aid Code. According to the second paragraph of Part I of the preamble to that decision, the prohibition in the ECSC Treaty on subsidies or aid granted by States applies only to measures constituting purely national steel policy instruments and not to aid aimed at setting up a Community steel policy, such as the restructuring of the steel industry, which was the aim of Decision No 257/80.

5. The First Steel Aid Code was subsequently replaced by successive codes, each establishing the rules applicable to State aid for the steel industry by laying down the criteria under which aid to the steel industry financed by a Member State in any form whatsoever may be deemed Community aid and therefore compatible with the orderly functioning of the common market.

6. In Decision No 3855/91/ECSC of 27 November 1991 the Commission established new rules on the grant of aid in this field (hereinafter the Fifth Steel Aid Code or the Fifth Code).

7. The provisions of the Fifth Code relevant for present purposes provide as follows:

- in Article 4(2):

aid to steel undertakings which permanently cease production of ECSC iron and steel products may be deemed compatible with the orderly functioning of the common market provided that the undertakings

- ...

- have been regularly producing ECSC iron and steel products up to the date of notification of the aid,

- ...;

- in Article 6(1):

The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid of the types referred to in Articles 2 to 5. ...;

- in Article 6(4):

If, after giving notice to the interested parties concerned to submit their comments, the Commission finds that aid in a given case is incompatible with the provisions of this decision, it shall inform the Member State concerned of its decision. ...;

- in Article 6(6):

All individual awards of the types of aid referred to in Articles 4 and 5 shall be notified to the Commission. ...

II - National legislation

8. At the beginning of 1994 the Italian Government enacted Decree-Law No 103 of 14 February 1994 introducing urgent measures for the implementation of its steel restructuring programme. Pursuant to Article 6(1) of the Fifth Code, it notified the Commission thereof in February 1994.

9. The validity of that decree-law was extended by Decree-law No 234 of 14 April 1994 and again subsequently by Decree-law No 396 of 20 June 1994. The latter decree-law was finally transformed into Law No 481/94 of 3 August 1994 on the restructuring of the Italian private steel sector (GURI No 183 of 6 August 1994, p. 12, hereinafter Law No 481/94).

10. Article 1(1) of Law No 481/94 provides for the grant of aid for the closure of steelworks on condition that the plant and equipment are dismantled within a specified period. Under Article 1(3) requests for aid must be submitted before 30 July 1994, whilst plant and equipment must be dismantled before 31 March 1995. Full payment must be made by 31 December 1996. Under Article 1(4) the technical rules for its implementation are to be laid down by decree of the Italian Minister for Industry, Trade and Craft Trades.

11. Article 1(1) of Ministerial Decree No 683 of 12 October 1994 (Decree No 683/94), notified to the Commission in August 1994, provides that, in order to receive the aid referred to in Article 1 of Law No 481/94, the undertakings concerned must comply, inter alia, with the following conditions:

(e) until the date of adoption of Decree-Law No 103 of 14 February 1994, ... have been engaged in regular production, as certified by a report sworn by a technical expert in the field, listed in the register of experts and appointed by the court within whose jurisdiction the company has its head office.

12. Under Article 2(4) of that decree the Minister for Industry, Trade and Craft Trades notified the various aid measures to the Commission with a view to prior authorisation.

III - The Commission decision authorising the aid scheme

13. By decision of 12 December 1994, the Commission authorised the aid scheme in principle, subject to prior notice being given of all actual cases of application of aid, pursuant to Article 6(6) of the Fifth Code.

14. The Commission stated that it would make its authorisation subject to compliance with certain conditions in each case. As regards the condition concerning regular production laid down in the second indent of Article 4(2) of the Fifth Code, the undertaking must have been in operation for on average at least one shift per day, that is to say, at least eight hours per day, five days per week for the whole of 1993 and until February 1994, when Decree-Law No 103/94 was notified to the Commission.

15. However, the Commission also stated that the Italian authorities were entitled to prove, on the basis of objective criteria, that an undertaking which did not satisfy that condition had regularly produced ECSC iron and steel products.

IV - Facts

16. On 8 September 1995 and 11 March 1996 the Italian Government notified the Commission, under Article 6(6) of the Fifth Code, of aid for the definitive closure under Law No 481/94 of, inter alia, Moccia, Casilina and Lamifer, three undertakings specialising in the production of steel and/or hot-rolled products.

17. In respect of 1993 they gave the following information:

- for Moccia: production capacity of 288 000 tonnes/year of crude steel and 165 000 tonnes/year of hot-rolled products and actual production of 0;

- for Lamifer: production capacity of 154 560 tonnes/year of hot-rolled products and actual production of 23 542 tonnes/year (15.2% of production capacity);

- for Casilina: production capacity of 80 000 tonnes/year of hot-rolled products and actual production of 11 356 tonnes/year (14.2% of production capacity).

18. In total, 43 ECSC steel undertakings established in Italy submitted requests for aid under Law No 481/94.

19. By letters dated 15 September 1995 and 12 June 1996 the Commission informed the Italian Government of its decision to initiate the procedure provided for in Article 6(4) of the Fifth Code in respect of the aid envisaged for the benefit, inter alia, of the applicant undertakings.

20. In those letters the Commission stated that it was clear, from the information available to it, that none of the undertakings in question, including the applicants, had been engaged in production for on average one shift per day, that is to say, at least eight hours per day, five days per week, throughout the whole of 1993 and up to 28 February 1994. Accordingly, the undertakings in question could not maintain that they were engaged in the regular production of steel products within the meaning of the second indent of Article 4(2) of the Fifth Code.

21. By Decision 96/678 the Commission stated that the aid which Italy planned to grant to Moccia and Casilina, amongst others, was incompatible with the common market within the meaning of Article 4(c) of the ECSC Treaty.

22. By Decision 97/258 the Commission made the same finding as regards certain other undertakings, including Lamifer.

V - Procedure before the Court of First Instance

23. By applications lodged at the registry of the Court of First Instance on 19 October 1996, Moccia and Casilina brought the actions registered as T-164/96 and T-166/96 respectively. By application lodged on 18 April 1997 Lamifer brought the action registered as T-122/97.

24. By order of the President of the Third Chamber, Extended Composition, of the Court of First Instance of 18 December 1998, the cases were joined for the purposes of the judgment.

25. By judgment of 12 May 1999 (hereinafter the judgment appealed against) the Court of First Instance dismissed all the applications and ordered the applicants to pay the costs including, jointly and severally, those of the Commission.

VI - Pleas on appeal

26. Moccia raises the following three pleas against the judgment appealed against:

- infringement and misapplication of Article 4(c) of the ECSC Treaty - insufficient and internally contradictory statement of reasons - misuse of powers;

- infringement and misapplication of the second indent of Article 4(2) of the Fifth Steel Aid Code;

- infringement of the principle of non-discrimination.

27. Casilina and Lamifer raise the following four pleas against the judgment appealed against:

- infringement of Article 4(c) of the ECSC Treaty, and of Article 95 of the Treaty and the absence of any statement of reasons for non-application of that article;

- infringement of the second indent of Article 4(2) of the Fifth Code;

- infringement, incorrect and unsupported application of the decision of 12 December 1994 authorising aid;

misuse of powers.

VII - Assessment of the pleas

28. The pleas raised, on the one hand, by Moccia and, on the other, by Casilina and Lamifer are for the most part directed against various parts of the judgment appealed against. Where they are challenging the same parts their arguments are different. For that reason I will deal with the pleas in the order stated above in summary form.

A - Moccia's first plea: infringement and misapplication of Article 4(c) of the ECSC Treaty

29. At first instance Moccia, together with certain other applicants in those proceedings, raised that plea against Decision No 96/678. It went on to state that an aid measure aimed at the definitive closure of undertakings was by nature not capable of distorting competition and therefore escaped the strict prohibition under Article 4(c) of the ECSC Treaty on the grant of aid.

30. There was therefore no reason to apply the provisions of the Fifth Code to closure aid. The Code contained a derogation based on Article 95 of the ECSC Treaty from the general prohibition under Article 4(c) of that Treaty. On the assumption that that prohibition is not applicable to the closure aid in the present case the provisions adopted under Article 95, namely the Fifth Steel Aid Code, are also not applicable to it. At the very most, were the latter provisions to be applicable they would have to be applied flexibly in regard to closure aid.

31. The reasoning on the basis of which the Court of First Instance dismissed that plea in paragraphs 75 to 91 of its judgment is said by Moccia to be contradictory: on the one hand it states that Article 4 of the Treaty seeks to secure normal competitive conditions; on the other, it takes no account of that statement in the interpretation of the prohibition of the grant of aid contained in paragraph (c) of that article. Moreover, the Court of First Instance wrongly omitted to give its reasons for adopting such a rigorous interpretation which in some cases would render the provision devoid of any plausible meaning.

32. That plea which is in particular directed against the reasoning of the Court of First Instance in paragraphs 82 to 84 of the judgment appealed against is in my view not tenable. In support of my view I shall first reproduce the abovementioned paragraphs of the judgment and then sum up the arguments which militate in favour of the correctness of the view taken in this case by the Court of First Instance.

82. The Court observes that the purpose of Article 4 of the Treaty is, as described above, to ensure "the establishment, maintenance and observance of normal competitive conditions" (De Gezamenlijke Steenkolenmijnen in Limburg v High Authority, cited above in paragraph 81, at p. 22). Article 4(c) prohibits subsidies or aids granted by States "in any form whatsoever". That phrase does not appear in Articles 4(a), 4(b) or 4(d) and this gives an unusually wide meaning to the prohibition it describes (judgment cited above, at p. 21). The prohibition so expressed is formulated in exceptionally strict terms because it targets direct interference in the operation of the common market in coal and steel, which is considered, as such, to be contrary to the very conditions on which the common market was established. For that reason, such aid is deemed incompatible with the common market without the need to establish or even to consider whether there is, in actual fact, any interference with the conditions of competition or it is liable to occur (see the Opinion of Advocate General Lagrange in De Gezamenlijke Steenkolenmijnen in Limburg v High Authority, cited above, [1961] ECR 34, at p. 41).

83 The system set up by Article 4(c) of the ECSC Treaty thus differs from that under Article 92(1) of the EC Treaty (now, after amendment, Article 87(1) EC). The former imposes a general and unconditional prohibition on all aid, which is in substance contrary to the very conditions in which the common market in coal and steel was established. The latter, on the other hand, only prohibits aid where it is such as to distort or threaten to distort competition by favouring certain undertakings or the production of certain goods.

84 It follows that aid for closure granted by a Member State to an ECSC steel undertaking falls within the prohibition of Article 4(c) of the ECSC Treaty, without its being necessary to establish that the conditions of competition have been undermined. The Fifth Code, whose purpose is to provide for derogations from that prohibition, can therefore apply to such aid.

33. In order to ensure a proper understanding of the Treaty system of the ECSC Treaty and of how Articles 4(c), 67 and 95 of the Treaty interrelate, it is as well to recall that the ECSC Treaty sought to create a partial common market limited to the coal and steel sector. On a partial common market of that nature the reciprocal competitive relations between the undertakings operating in it are susceptible in three ways to disturbances. In the first place they are vulnerable to disturbances arising out of disparities in macro-economic developments in the national economies concerned which may manifest themselves for example in divergent price and wage inflation trends. Secondly, they are sensitive to discrepancies in general measures adopted by the Member States which, although not exclusively directed at the coal and steel sectors, such as for example an alteration in the general charges imposed on undertakings, have an impact on those sectors. Thirdly, they are sensitive to measures adopted by the Member States which are specifically and exclusively directed to the coal and steel sector, whether in the form of specific relief from charges (subsidies and other forms of State aid), or in the form of specific increases in such charges.

34. The ECSC Treaty provides for two clearly distinguishable forms of action against distortions of competition flowing, on the one hand, from disparities in the macro-economic and general policies of the Member States and, on the other, from disparities in the specific interventions of the Member States directed at the coal and steel sectors. In respect of the first mentioned categories of distortion stemming from national policy measures over which the Member States have in principle retained their competencies, Article 67 of the ECSC Treaty provides for the possibility of coordination in order to permit the Member State by way of recommendation to adopt compensatory measures for their coal and steel sectors. Such compensatory measures may be directed at the coal and steel industry of the State adopting the measures concerned or at the coal and steel industries of other Member States, depending on the content and consequences of the relevant measures. As for the last mentioned category of distortions flowing from specific national measures directed exclusively at the coal and steel industry, the ECSC Treaty contains the categorical prohibition laid down in Article 4(c).

35. The rationale for that difference in treatment provided for in the ECSC Treaty by the framers of the Treaty is that specific intervention by national governments directed exclusively at the coal and steel industry are very apt to affect the functioning of the common market in coal and steel and to distort competitive conditions in it. The mere existence of such measures is deemed sufficient by the framers of the Treaty to give rise to a presumption that competitive conditions are being affected. In addition, under the ECSC Treaty, the Member States have given up their competencies in regard to the establishment and operation of the common market in coal and steel. Those competencies also include specific intervention in the coal and steel market in the form of State aid to undertakings.

36. Conversely, the Member States have retained their competencies in other areas, such as in fiscal matters, social security and general economic policy. In order to limit the consequences of disparities in the policies of the Member States, it is essential for there to be policy coordination extending to policy in areas in which the Member States have not transferred their competencies, but from which consequences may flow in the form of competitive disturbances on the common market.

37. In respect of the measures caught by the categorical prohibition under Article 4(c), only under Article 95 of the ECSC Treaty may these, by way of derogation, be permitted under the strict substantive and procedural conditions laid down therein.

38. It occasions no surprise that legal questions concerning the scope and applicability of Article 4(c) and the demarcation line to be drawn between Article 4 aforesaid and Article 67 of the ECSC Treaty formed the subject-matter of the Court's earliest case-law. The far-reaching limitation entailed by Article 4(c) on the Member State's authority to act made its application very controversial.

39. In its judgment in Joined Cases Groupement des Industries Sidérurgiques Luxembourgeoises v High Authority the Court found that a charge imposed on solid fuels for non-domestic use was equally applicable to all industrial users and could not therefore be regarded as a specific charge applying only to the coal and steel sector. Accordingly, the Court held that Article 67 of the ECSC Treaty was applicable to it and not Article 4(c).

40. In its judgment some years later in De Gezamenlijke Steenkolenmijnen in Limburg v High Authority the Court had to rule on a German mineworker's bonus paid out of public funds in favour of German coalminers. In that case the Court held that such a bonus was to be regarded as a specific subsidy within the meaning of Article 4(c) of the Treaty and thus prohibited. In the context of the case now before the Court, that judgment continues to be of considerable importance because it was the start of the development of the notion of subsidies, further elaborated in the Court's subsequent case-law, and because it further specifies and elucidates the reciprocal scope of Articles 4(c) and 67 of the ECSC Treaty. Thus, the Court dismissed expressis verbis the German Government's argument that Article 67 further elaborates on the application of the prohibition in Article 4(c). These are two provisions which differ in their sphere of application.

41. It follows from the case-law referred to above that the prohibition under Article 4(c) of the ECSC Treaty on the grant of aid is subject to two conditions only:

- the measure must be classifiable as subsidies or aids granted by States;

- the measure must be specifically directed at and limited to the coal and steel sector.

42. What is the significance of the above analysis to the plea raised by Moccia?

43. First, it is abundantly clear that the closure aid at issue also comes within the unconditional prohibition on the grant of aid laid down in Article 4(c). That it is a national aid measure is not in dispute and that the measure is directed at and limited to the ECSC steel industry is expressly laid down in Italian law No 481/94. Thus, in the present case there can be no doubt as to the applicability of Article 4(c) to the contested closure aid.

44. Secondly, as regards the application of Article 4(c) aforesaid it does not need to be emphasised that the prohibited aid measures must affect the functioning of the common market. Pursuant to indications given by the framers of the Treaty they are deemed to do so.

45. Thirdly, the substantive scope of a decision adopted under Article 95 of the Treaty, such as the Fifth Steel Aid Code at issue in this case, must extend to all forms of State aid falling under the prohibition in Article 4(c) of the ECSC Treaty, irrespective of their nature or extent: that which is prohibited under Article 4(c) can be permitted only under an express decision under Article 95. There can be no exception in the case of aid for closure.

46. These findings are in themselves capable of leading to the conclusion that the reasoning at paragraphs 82 to 84 of the judgment appealed against is correct in light of the wording and scheme of the ECSC Treaty and that the plea raised against those paragraphs must therefore fail.

47. I wish to add one further point. Both at first instance and now on appeal Moccia has contended that the prohibition under Article 4(c) of the ECSC Treaty on a less rigid interpretation tailored more to economic practice should not be applicable to closure aid because that form of aid will by definition very soon not have an effect on competition.

48. This view is not, it seems to me, tenable. It overlooks the fact that the aim of the closure aid permitted under the Fifth Code is to restore structural equilibrium between demand and supply on the common market in steel. It may thus unreservedly be said of such a measure that it affects the operation of that market - as described in Article 4(c). Were there no such effect, closure aid as an instrument of policy would be rendered ineffective from the outset.

49. Moreover, in fairly homogeneous production markets such as those for crude steel and hot-rolled steel products, any measure which seeks on the supply side to limit production capacity is very apt to have an influence on market conditions and thus its operation. In economic effect such measures are comparable to agreements between competitors to limit production. Their consequences become apparent not only in competitive relationships between the remaining producers but also in the relationship between the demand and supply sides of the market. In view of its effects, aid for closure or disinvestment is therefore caught, in the same way as its counterpart aid for establishment or investment, by the prohibition under Article 4(c). Thus, Moccia's view of the matter is without any substantive foundation.

50. I conclude that that plea is unfounded.

B - Moccia's second plea: infringement and misapplication of the second indent of Article 4(2) of the Fifth Steel Aid Code

51. This plea is directed specifically at paragraphs 153 to 158 of the judgment appealed against. In those paragraphs the Court of First Instance rejected the submission that the Commission had incorrectly applied the condition concerning regular production contained in the second indent of Article 4(2) of the Fifth Code in such a way as to exclude undertakings which in the reference period did not have sufficient actual production but were none the less in a position to produce.

52. The essential features of the Court of First Instance's reasoning are as follows:

- Article 4(c) of the Treaty prohibits State aid;

- prohibition of aid is the norm and the Fifth Steel Aid Code is an exception to it which must therefore be strictly interpreted;

- it follows that the second indent of Article 4(2) of the Fifth Code must be interpreted all the more strictly (paragraph 153);

- it may be inferred from that condition according to which an undertaking applying for aid for closure must have been producing ECSC steel products on a regular basis that the aim of the Fifth Code is not to encourage the closure of no matter which undertaking in order thereby to achieve a reduction in production capacity;

- the objective is to authorise only the grant of aid for undertakings with a significant presence on the market, the closure of which will bring about a commensurate decrease in actual steel production (paragraph 154);

- by adopting the requirement of regular production the Community legislature sought to increase the effectiveness of closure aid;

- it ensures that its effects are sufficiently significant, not only in terms of the dismantlement of plant and equipment but also in terms of reducing the current level of production (paragraph 155);

- that objective was achieved because the closure aid granted reduced production of hot-rolled steel by more than 5 million tonnes (paragraph 156);

- the alternative criterion put forward by the applicants, namely the mere possibility of producing, plainly conflicts with that condition because it takes no account of the requirement that there be actual regular production;

- application of that criterion would therefore undermine the objective pursued, that is to say a reduction in actual production (paragraph 157);

- it follows that the Commission, in rejecting suitability for production as a criterion did not manifestly fail to observe the provisions of the Treaty or a rule of law relating to its application, nor did it misuse its powers (paragraph 158).

53. Moccia contends that the reasoning of the Court of First Instance set out above demonstrates an incorrect view of the law resulting in an unnecessarily restrictive interpretation of the second indent of Article 4(2) of the Fifth Code. That provision, according to Moccia, is intended to prevent antiquated installations which have been out of commission for a long time and could therefore be of no significance to the endeavour of limiting production at Community level from nevertheless being considered for closure aid. A reasonable and plausible interpretation of this provision would have to mean that undertakings such as Moccia which have recently modernised their plant and, because they were engaged in further modernisation, did not produce during the reference period, could nevertheless be considered for the grant of closure aid.

54. In its refutation of this view of the matter the Commission relies on all parts of the Court of First Instance's reasoning set out above.

55. It follows from my observations on Moccia's first plea concerning the interrelationship between Article 4(c) and Article 95 of the ECSC Treaty that decisions adopted under the latter article whereby an exception is made to the general prohibition on the grant of aid under Article 4(c) must by their nature be strictly interpreted.

56. In its reasoning the Court of First Instance correctly establishes, by reference to its recent case-law on that subject, the principle of strict interpretation for the interpretation of decisions adopted under Article 95 such as the Fifth Steel Aid Code.

57. The desirability of such strict interpretation is further emphasised by the Community legislature itself in Part I of the preamble to the Fifth Code in the following terms: The strict regime thus established, which now applies to the entire territory of the (Community) ....

58. The interpretation to be given to the second indent of Article 4(2) of the Fifth Code must be approached in the light both of the general principle that exceptions under Article 95 to the general prohibition under Article 4(c) on the grant of aid are to be strictly interpreted and of the preamble to the Fifth Code itself which gives a restrictive meaning to the aid measures permitted under the Code.

59. It follows that Moccia must have weighty substantive arguments to warrant a more extensive interpretation of the second indent of Article 4(2).

60. The very terms in which that provision is couched - have been regularly producing ECSC iron and steel products up to the date of notification of the aid - leave little room for ambiguity as to its scope ratione personae: it covers undertakings which up to the date of notification of the aid have been actively and to a significant extent engaged in the production process.

61. The wording of Part I of the preamble to the Fifth Code is also clear: aid to finance the permanent cessation of all ECSC activities by the least-competitive enterprises. The use of the term competitive can hardly be construed otherwise than as confirmation of the point of departure that the closure aid permitted under Article 4(2) of the Code can only concern undertakings which are regularly engaged in production. Idle undertakings or ones operating with only a fraction of their capacity can hardly be described as competitive.

62. The purpose of this exception to the general prohibition on the grant of aid, namely to reduce existing overcapacity in the territory of the ECSC affords further justification for limiting that measure to those undertakings which are regularly in production. When such undertakings disappear from the market that has immediate consequences for total product supply and the objective pursued becomes immediately discernible in market conditions. That direct and useful effect of the permitted exception would be less easily attained, or not at all, if it were applied to undertakings with little or no production. Viewed in that light, the second indent of Article 4(2) imposes an objective and proportionate restriction on the scope ratione materiae of the permitted closure aid. That view of the matter is corroborated by the reference in paragraph 156 of the judgment appealed against to the result of closure aid - a reduction in annual production of more than five million tonnes.

63. The plea is therefore unsubstantiated.

C - Moccia's third plea: infringement of the principle of non-discrimination; misuse of powers

64. Moccia's third plea is directed against paragraphs 227 and 233 of the judgment appealed against. In those paragraphs the Court of First Instance found Moccia's plea that, for the purposes of closure aid, undertakings with one site were discriminated against as compared to those with several sites was unfounded.

65. Moccia submitted before the Court of First Instance that the Commission, in assessing the Italian aid scheme which had been submitted to it, implicitly went along with Article 1(2) of the ministerial decree implementing Law No 481/94. That provision defines the term production site as a production unit capable of producing. The inference to be drawn therefrom, according to Moccia, is that on closure of one site belonging to an undertaking with several sites closure may be granted in favour of an affected site but only so long as it is capable of producing, whereas an undertaking with only one site may receive aid only if it can show that it has been regularly producing ECSC iron and steel products up to the date of notification of the aid. It infers therefrom that the condition concerning regular production would not seem to apply to undertakings belonging to the former category but only to those in the latter category. Consequently, there is, it says, discrimination as between the two categories of undertaking.

66. In the judgment appealed against this plea is refuted in the following terms:

- The Court of First Instance established on the basis of a largely verbatim reproduction of Article 1(1) and (2) of the ministerial decree that Article 1(1) laid down the conditions to be met by a steel undertaking in order to be considered for closure aid. One of those conditions is the requirement of regular production (paragraphs 228 and 229);

- Article 1(2) defines the term production site which is reproduced in Article 4 of the decree concerning the legal reorganisation to be effected by an undertaking with several production sites one or more of which are dismantled following the award of closure aid (paragraph 230);

- The Court of First Instance concludes that the two provisions therefore pursue different objectives. Article 1(2) of the measure is not formally intended to provide for an exception to the conditions laid down in Article 1(1) which steel undertakings seeking closure aid must meet. In particular, the terms used in Article 1(2) do not imply that an undertaking contemplating the closure of one of its production sites need not fulfil the requirement of regular production laid down in Article 1(1)(e) (paragraph 231);

- The Court of First Instance's reasoning is as follows: It follows from the above provisions ... read in conjunction with one another, that closure aid may be granted, not only in the event of total closure of an undertaking but also, where an undertaking has several production sites, in the event of closure of one of those sites. In the latter case, however, the aid can be granted to that undertaking only if that site, viewed in isolation, was engaged in regular production and such production was effected independently and entirely by that site, which presupposes that a complete rolling cycle or a complete crude steel production cycle is capable of being carried out there (paragraph 232);

- The Court of First Instance concludes as follows: Article 1(2) of the implementing measure, far from constituting a derogation from the requirement of regular production in the assessment of aid sought by an undertaking in connection with the closure of one of its production sites, is intended to ensure that the site's regular production is not confined to one part only of a full rolling or crude steel production cycle (paragraph 233).

67. Moccia states that this reasoning is insufficient because inherent in it is an implicit yet unfounded refusal to view the definition of the production site as a special provision. Furthermore, the Court of First Instance's arguments are said to contain a petitio principii. The judgment states that in the event of closure of a production site the latter must satisfy not only the criterion of regular production but also of suitability for production. Satisfying the requirement of regular production is said to subsume within itself the requirement of suitability for production. Thus, according to Moccia, the Court's reasoning is illogical.

68. The Commission rightly points out that this plea essentially seeks to highlight a flaw in the reasoning of the judgment appealed against. That is why I reproduced in extenso the Court of First Instance's contested reasoning at point 68 above.

69. I can be brief in my appraisal of this plea.

Plainly the ministerial decree at issue must make separate provision for undertakings with more than one production site desirous of being considered for aid on closure of a production site.

In order to prevent the measure from being applied to the closure of sites on which only ancillary or support activities were carried on, the ministerial decree had to give a definition of fully operational production sites capable of being considered for closure aid. That definition in Article 1(2) of the ministerial decree in no way detracts from the requirement of regular production laid down in Article 1(1). The Court of First Instance's reasoning set out above which found Moccia's view of the matter to be unsubstantiated adheres to these pointers and draws the correct conclusion from them. There is therefore no question of any failure to provide an adequate statement of reasons.

70. The allegation contained in the initial part of that plea of a misuse of powers is neither elucidated nor substantiated in the notice of appeal. It is therefore in my view inadmissible. I also refer in that connection to my observations on the fourth plea raised by Casilina and Lamifer.

71. Accordingly, I conclude that this plea should be declared manifestly inadmissible.

D - Casilina's and Lamifer's first plea: infringement of Article 4(c) of the ECSC Treaty and inadequate statement of reasons in regard to unlawfulness of the Fifth Code; infringement of Article 95 of the ECSC Treaty and inadequate statement of reasons in regard to non-application by the Commission of the possibility of derogation pursuant to this provision

72. In the first part of this plea Casilina and Lamifer, in sum, contend that the Court of First Instance infringed Article 4(c) of the ECSC Treaty by regarding the closure aid in question as a subsidy prohibited under that article and by omitting to examine the unlawfulness of the part of the Fifth Code which permits closure aid. In the Commission's view this part of the plea is inadmissible. At first instance these appellants did not submit that closure aid did not fall under the prohibition in Article 4(c), nor did they plead unlawfulness of the Fifth Code. As is apparent from paragraphs 75 to 91 of the judgment appealed against, arguments of that kind were raised only by Moccia in Case T-164/96 and by Sidercamuna in Case T-130/97.

73. In the Commission's opinion, that view of the matter is further corroborated by paragraph 41 of the judgment appealed against from which it appears that the appellants directly raised not a single argument against the Fifth Code. Moreover, that paragraph of the judgment appealed against does not form part of the present appeal.

74. Relying on the Court's settled case-law in the matter, the Commission states that a plea cannot be raised on appeal which was not raised at first instance. Even in a case where a number of actions have been joined for the purposes of the judgment a party may not raise a plea on appeal which was put forward at first instance not by it but by other parties in the relevant joined cases.

75. The arguments in support of this objection of inadmissibility are strong ones. Indeed in a series of judgments, most recently in Petrides v Commission, the Court has held that, under Articles 113(2) and 116(1) of the Rules of Procedure, it is not permissible to raise on appeal pleas not put forward at first instance.

76. In my opinion that must also remain the case where a party in a case joined at first instance raises a plea on appeal which was put forward not by it but by other parties in the joined case. Where cases are joined for the purposes of the judgment each party to the proceedings remains responsible for the pleas and defences which it raises. That is true of proceedings at one instance, as the Court of First Instance held in Buchmann v Commission and, a fortiori at the appellate stage where the nature of the proceedings precludes the Court from adjudicating on a dispute of wider ambit than that which was, in regard to that party, before the Court of First Instance. That prevents parties from, as it were, lifting each other's pleas and thus rendering conduct of the proceedings more difficult.

77. At the hearing Casilina and Lamifer countered the objection of inadmissibility raised by the Commission with the argument that at first instance they were claiming annulment of Decision No 96/678, the decision of 12 December 1994, together with any other earlier, related or derivative act. Thus, their appeal is said to be directed also against parts of the Fifth Steel Aid Code whose legal validity they are seeking to dispute in the plea at issue. Viewed in that light the plea, they say is not new but an extension of their submissions at first instance.

78. In my view that reasoning cannot be upheld. Whilst it is true that the appellants' claim can be regarded in such a way as also to encompass the illegality of the Fifth Steel Aid Code, they did not put forward any such specific plea at first instance. At paragraph 41 of the judgment appealed against the Court of First Instance stated: ... It is true that in those cases no argument is directed specifically at the Fifth Code, it being rather the basis for the criticisms levelled at the legality of the decision of 12 December 1994 and Decisions 96/678 and 97/258 .... Inasmuch as the appellants do not contradict this finding of the Court - they have raised no plea against it - it is difficult for them to maintain that they directly challenged the legality of the Fifth Steel Aid Code at first instance.

79. I therefore conclude that the first part of this plea is inadmissible.

80. For an assessment, on a purely ancillary basis, of the content of that part I refer to my observations on Moccia's first plea. Although Casilina and Lamifer highlight certain other aspects in their arguments, their submissions also focus on the view that closure aid does not by definition affect the operation of the Community steel market and therefore falls outside the scope of Article 4(c) of the ECSC Treaty. They deduce therefrom the further consequence that authorisation by the Commission under Article 95 of the ECSC Treaty is not necessary for closure aid and that therefore those parts of the Fifth Steel Aid Code which relate to closure aid are unlawful.

81. In support of their view they refer in particular to the judgment cited above in Groupement des Industries Sidérurgiques Luxembourgeoises v High Authority and in particular to the Opinion of Advocate General Roemer in that case. They deduce from that judgment that the scope of the prohibition under Article 4(c) is limited to aid intended to create artificial competitive advantages.

82. In my view, and I find support for my position in the Opinion of Advocate General Lagrange in the judgment cited above in De Gezamenlijke Steenkolenmijnen in Limburg v High Authority, the issue in Groupement des Industries Sidérurgiques Luxembourgeoises was primarily whether a specific charge imposed without distinction on the whole of Luxembourg industry could be deemed to be a special charge within the meaning of Article 4(c) of the ECSC Treaty. The Court held that it could not, with the consequence that Article 67 of the ECSC Treaty was applicable to it. No argument in favour of the non-applicability of Article 4(c) can be derived from Groupement des Industries Sidérurgiques Luxembourgeoises for the purposes of the present case which concerns a subsidy directed solely at the steel industry.

83. The view that the closure aid at issue could not affect the functioning of the common market I have rejected as totally unsubstantiated.

84. My alternative conclusion concerning that part of the first plea is that it is unfounded.

85. The Commission also raises an objection of inadmissibility to the second part of the first plea in which it is stated that Article 95 of the ECSC Treaty was infringed and that the reasons for the non-applicability of that provision are inadequately stated.

86. That plea is directed at paragraphs 259 and 260 of the judgment appealed against in which the Court of First Instance refutes the plea raised by Sidercamuna in Case T-130/97 that the Commission discriminated against it by treating its case differently from other comparable cases in the past.

It is not apparent from the judgment that Casilina and Lamifer at first instance raised the same or a comparable plea.

87. For an appraisal of this objection I refer to my analysis at points 79 to 83 above and conclude that this second part of the first plea is also inadmissible.

88. Again purely in the alternative, I am compelled to conclude that this plea is also unfounded.

89. In support of its plea the applicant Sidercamuna at first instance submitted that the Commission wrongly did not avail itself of its competence under Article 95 of the ECSC Treaty to adopt a specific decision derogating from the general rules of the steel aid code. Since the Commission has so availed itself in the past, it treated comparable situations unequally, thus placing Sidercamuna at a disadvantage.

90. The Court of First Instance rejected this plea on the ground, in sum, that Sidercamuna had not in any event demonstrated that there were special circumstances applicable to it which, in light of the objectives of Articles 2 to 4 of the ECSC Treaty, would have compelled the Commission to adopt a specific decision addressed to it.

91. In the second part of the first plea Casilina and Lamifer essentially state that the Court of First Instance misinterpreted Article 95 of the ECSC Treaty by not examining whether the Commission was obliged to inquire whether the Italian closure aid could not be awarded to applicants on an individual basis.

92. This view of the matter is unsustainable. According to recent case-law on the application of Article 95 aforesaid, where the Commission finds that a national aid measure does not satisfy the conditions of a steel aid code it may nevertheless consider undertakings for the grant thereof on an individual basis where pursuit of the objectives laid down in Articles 2, 3 and 4 of the ECSC Treaty so require. That is reaffirmed in paragraph 258 of the judgment appealed against. The Court of First Instance rightly makes that subject in paragraph 259 to the requirement that the undertakings which invoke this ground for a derogation must at least show prima facie evidence of special circumstances prompting the Commission to acknowledge that there is a need for the adoption of a specific decision of that kind.

93. The finding at paragraph 259 that Sidercamuna has not demonstrated the existence of special circumstances is a finding of fact which cannot be challenged on appeal. The appellant's assertion that the aid measures at issue concerning it satisfy the requirements for specific application of Article 95 is likewise of a factual nature. The fact that it is made only on appeal also renders it inadmissible on those grounds.

94. If and in so far as that second part of the first plea may be regarded as admissible it is unfounded.

E - Casilina's and Lamifer's second plea: infringement and misapplication of the second indent of Article 4(2) of the Fifth Steel Aid Code

95. In their second plea the appellants in sum criticise the Court of First Instance for wrongly accepting the application by the Commission of the criterion of the highest possible production in assessing whether production could be deemed to be regular within the meaning of the second indent of Article 4(2) of the Fifth Code (paragraphs 136 to 139 of the judgment appealed against). In addition, they criticise the Court of First Instance for upholding the application of 1993 alone as the reference period for assessing the significance of an undertaking's market presence (paragraphs 118 to 127 and 128 to 133).

96. They are of the opinion that the Court of First Instance ought to have upheld their view of the matter and ought to have concluded from their actual production assessed over a longer reference period, namely from 1 January 1991 rather than 1 January 1993, that they satisfied the requirement under the Fifth Code of regular production.

97. In regard to this plea the Commission observes that the appellants are essentially repeating their factual arguments which they submitted before the Court of First Instance and were rejected by that court. It is of the view that the plea therefore runs counter to Article 32 of the ECSC Treaty and Article 51 of the ECSC Statute of the Court because it demands a re-appraisal of the facts on appeal. Moreover, that plea is said to lack the precision required under Article 51(1) of the Statute and Article 112(1)(c) of the Rules of Procedure of the Court. The Commission infers therefrom that that plea too is inadmissible.

98. Indeed both the formulation and the reasoning of that plea leave much to be desired because, on the one hand, it seems strongly to challenge the view formed on the facts by the Court of First Instance as to the applicants' actual production in the years 1991 to 1993 and, on the other, if not expressly then by implication, it is calling in question the legal appraisal of the Court of First Instance.

99. The Commission is correct inasmuch as the arguments underpinning that plea to a considerable extent reiterate the account of the facts on the basis of which the applicants at first instance contested Decisions 96/678 and 97/258. It is also true that the appellants' arguments are imprecise in the sense that they do not clearly state on which points the judgment appealed against is supposed to have infringed Community law. If we leave to one side the factual arguments since they are inadmissible and consider the arguments raised in that connection the plea may be summarised as follows:

The Court of First Instance misinterpreted the second indent of Article 4(2) of the Fifth Steel Aid Code by taking the view that, in giving effect to the requirement laid down therein of "regular" production, the Commission had to apply the criterion of the highest possible production and the period from 1 January 1993 to the date of notification as the reference period.

In the alternative:

The Court of First Instance's judgment in this regard is underpinned by inadequate reasoning.

Formulated in that way the nub of the plea is in my view admissible.

100. In order to form an assessment as to whether that plea is substantiated we must first examine the Fifth Steel Aid Code itself. I would recall that in accordance with the preamble to the Code closure aid is intended for competitive undertakings which, notwithstanding the structural problems on the steel market, have been able to maintain a considerable part of their production capacity in operation. In order to determine what constitutes a substantial part of production capacity, the starting point in every case must be to seek a definition of production capacity. Then it must be determined what is to be deemed a substantial part thereof.

101. In the judgment appealed against the Court of First Instance, recognising that the Commission has a certain margin of discretion in establishing the relevant criteria, determined that the highest possible production provides an acceptable criterion in assessing whether the requirement of regular production is satisfied. Such a criterion, the Court of First Instance observes at paragraph 138 of the judgment appealed against, prevents a situation where aid would ultimately be awarded even to undertakings which, although in irreversible crisis, none the less managed to survive on the market for some years with a level of production which is very low.

102. In view of the wording and scope of the Fifth Steel Aid Code which is not primarily concerned with the dismantling of production capacity but with removing productive capacity from the market the Court of First Instance was entitled to form that view of the matter. Therefore the appellants' plea to the contrary, though admissible, is ill-founded.

103. The appellants' complaints against the Commission's determination of the reference period are twofold. In the first place, the Commission, they contend, ought to have sought a tie-up with the date of 1 January 1991 mentioned in the first and third indents of Article 4(2) of the Fifth Code. Secondly, the insufficient duration of the reference period is said to make it impossible to judge whether the presence of an undertaking on the market is significant. They are reiterating these complaints on appeal, this time against the Court of First Instance's reasoning, althought they were found to be unsubstantiated at first instance.

104. On this point as well the choice made by the Commission in delimiting the reference period must be assessed in the light of the wording and scope of the Fifth Code. At paragraphs 120 to 127 the Court of First Instance explained why the Commission was not obliged to allow the reference period to commence as at 1 January 1991:

- it is clear from the wording of Article 4(2) laying down the conditions for the grant of closure aid that each of the three conditions referred to has its own time-limit:

- first indent: that the undertaking must have acquired legal personality before 1 January 1991,

- second indent: the undertaking must have regularly been producing up to the date of notification of the aid,

- third indent: the undertaking must not have reorganised its production or plant structure since 1 January 1991 (paragraphs 121 and 122),

- if the Community legislature had intended to set 1 January 1991 as the date of commencement of the reference period, it would have done so expressly (paragraph 123);

- the scope of the first and third indents is different from that of the second indent. In the first two cases the intention is clearly to prevent fraud (formation of companies or increase in production of a plant purely in order to benefit from aid). In the latter case the objective is to ensure that the award of closure aid brings about an appreciable reduction in production, which implies that such aid is to be awarded only to undertakings which at the time of closure had a reasonable level of production (paragraph 124),

- therefore there is no compelling reason why the requirement of regular production should be assessed from 1 January 1991 (paragraph 126).

105. The reasoning given here in summary form in the relevant part of the judgment appealed against satisfies both the requirement of conforming to the wording and scope of Article 4(2) of the Fith Steel Aid Code and the associated requirement to provide a statement of reasons. The appellants' arguments directed against that reasoning are therefore to no avail.

106. The appellants' most significant complaint against that part of the judgment appealed against which refuted their viewpoint that the reference period applied by the Commission, that is to say commencing 1 January 1999, was too short is that the Court of First Instance failed to recognise that the requirement of regular production entails a continuous level of production stretching over several years. Additionally, the Court of First Instance in taking the view of the matter which it did failed to take into account that the choice of 1993 as reference year was inappropriate since that was a period of reduced economic activity in Italy which depressed output. Finally, the appellants consider that the Court of First Instance was wrong to dismiss out of hand their reference to Commission Decision No 89/467/EEC in paragraph 132 of the judgment appealed against. They thereby sought to show that variations in the market share of undertakings from one year to the next did not necessarily reflect changes in their economic presence on the market which was instead to be assessed as part of a dynamic process. An assessment of that process required a longer reference period than was applied by the Commission in this case.

107. Did the Commission make a legally justified use of its margin of discretion which it enjoyed under the second indent of Article 4(2) of the Fifth Steel Aid Code in determining the duration of the reference period? That is the question which the Court of First Instance answered - affirmatively - at paragraphs 127 to 133. It adjudged the following matters to be of decisive importance in that connection:

- in order to ensure that the closure aid will have the signifcant market effects contemplated, a period as close as possible to the date of notification of the general scheme had to be chosen so that aid would be awarded only to undertakings actually in operation at that point in time (paragraph 129);

- the length of the period had to be sufficient to ascertain whether the presence on the market of the undertakings in question could be considered to be significant enough (paragraph 129);

- the closure of undertakings which had produced in 1991 and 1992 but no longer or to a much smaller extent from 1993 to the date of notification would have contributed little or nothing to the proposed reduction in production (paragraph 130),

- conversely, application of a longer reference period could have led to undertakings with a low level of production in 1991 and 1992 and significant production in 1993 being denied the benefit of the aid (paragraph 130);

- referring to the result of closure aid (a reduction in production of around 5 million tonnes), the Court of First Instance found that the reference period chosen by the Commission for the assessment of regularity of production not only made it possible to evaluate correctly the presence on the market of the undertaking intended for closure but also enabled the reduction targets set by the Italian Government to be achieved in practice (paragraph 131),

- the Court of First Instance concluded that it had not been shown that the Commission, in fixing the duration of the period within which regularity of production must be assessed, manifestly failed to observe the provisions of the Treaty or any rule of law relating to its application or misused its powers (paragraph 133).

108. The Court of First Instance's reasoning briefly summarised above makes it clear that in determining the reference period the Commission has to reconcile two objectives: the greatest possible effect in practice of the closure aid on current production of steel and steel products and a reasoned evaluation of the importance of the market presence of the undertakings concerned. In light of the wording and scope of Article 4(2) of the Fifth Code, the Court of First Instance was entitled to regard the resulting choice of the length of the reference period as justifiable in law.

109. In their plea the appellants put forward no arguments which could substantively call in question the Court's judgment on that point.

110. The argument which they advance in connection with the poor economic situation in Italy in 1993 is of a factual nature and must be regarded as inadmissible. Even if it were admissible it would be unfounded. The rules provided for in the Fifth Code were intended to deal with the structural crisis with which the steel sector has been confronted since the beginning of the 1970s. The form given to, and the application of, those rules cannot be made to depend on economic fluctuations occurring over much shorter periods. If it were, then the result in the present case would have been that undertakings which appeared to be vulnerable in less favourable economic conditions and thus were less competitive would have been considered for closure aid. In the preamble thereto the Fifth Code is expressly opposed to that.

111. Nor can I share the appellants' view that the Court of First Instance was wrong to dismiss their arguments based on Decision No 89/467 (paragraph 132 of the judgment). As the Court of First Instance pointed out, that decision related to the film distribution sector and concerned an assessment of the economic power of participants in the relevant market. There are no arguments to be derived from that decision for the purpose of assessing the reference period for closure aid in the steel sector: the characteristic features of the product markets, market structures and policy objectives are too divergent.

112. My conclusion is that Casilina's and Lamifer's second plea, in as far as it is admissible, is unfounded.

F - Casilina's and Lamifer's third plea: infringement and misapplication of the Commission decision of 12 December 1994

113. In this plea Casilina and Lamifer allege that the Court of First Instance infringed and applied incorrectly, that is to say without providing an adequate statement of reasons, the Commission decision of 12 December 1994. They point out that in that decision the Commission had given an assurance that it would consider proposals to grant aid, taking account of the special circumstances of the undertakings eligible for it. With that in mind the appellants had given particulars of their production in 1991, 1992 and 1993, as well as the special problems with which they had to contend in that period. However, in Decisions 96/678 and 97/258 the Commission dismissed out of hand the assessment criteria which the Italian Government, taking account of the special position of the appellants, had put forward. The Commission took the view that those criteria were not appropriate to demonstrate regularity of production within the meaning of the second indent of Article 4(2) of the Fifth Steel Aid Code. At most they would support a presumption that it would be possible to attain a certain minimum level of production. At first instance the appellants' pleas in that connection were rejected (paragraphs 272 to 283).

114. The appellants take the view that they cannot but make the same allegation afresh in which they criticise the Commission for providing a statement of reasons for the decisions which was inadequate and couched in too general terms. That hampered them considerably, they say, in the defence of their interests because they were thereby deprived of the opportunity of directing targeted criticism at those decisions. They go on to criticise the Court of First Instance for dismissing out of hand with an inadequate statement of reasons the special circumstances with which Lamifer in particular had to contend (paragraphs 180 to 182) and that it incorrectly assumed that rolling mills are normally in continuous operation with production based on three shifts of eight hours' duration each (paragraphs 140 to 145).

115. Owing to its imprecision, the first part of that plea, which is directed at the paragraphs of the judgment appealed against in which the appellants' complaints against the reasoning of Decisions 96/678 and 97/258 were rejected, occasions me some difficulty. If I understand it correctly, the appellants are contending that in framing the reasoning of those decisions the Commission ought specifically to have paid attention to the views and arguments which the appellants had brought to its notice. In the absence thereof they were seriously hampered in their opportunities of legally representing their interests. In the judgment appealed against the Court of First Instance paid insufficient attention to those matters. The appellants omit to state precisely in which respect the relevant passages of the judgment fall short in this regard. That may in itself be a reason for holding that part of the plea to be inadmissible. However, neither a mere repetition of the pleas raised at first instance nor an unsubstantiated statement that the law has been infringed are sufficient according to settled case-law. Only when the reasoning underlying that part of the plea has, with some difficulty, been reconstructed, can it be construed as a complaint against the reasoning in paragraphs 272 to 280 of the judgment appealed against. I shall assess it as such in what follows below.

116. It has been consistently held that the statement of reasons required by the fourth indent of the second paragraph of Article 5 and the first paragraph of Article 15 of the ECSC Treaty must be appropriate to the measure concerned and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the Community judicature to exercise its power of review. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 190 of the Treaty must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. In the case of a measure which is intended to be of general application, ... the Commission is obliged to mention in the reasons on which its decision is based the situation as a whole which led to the adoption of the decision and the general objectives which it seeks to attain.

117. It seems to me appropriate to examine first the factual and legal backgrounds against which the contested decisions came into being and the general policy objectives which were of primary importance in that connection. In light of those matters the reasoning can be tested against the requirements of transparency for the persons concerned as regards the grounds justifying the decisions and reviewability by the Community judicature.

118. When on 8 September 1995 and 11 March 1996 the Italian Government submitted to the Commission the various cases to which it wished to apply the legislation on closure aid approved in principle by decision of 12 December 1994, there were a number of cases, including Casilina and Lamifer, which did not satisfy the criterion laid down in the aforementioned decision for assessing whether the requirement of regular production was satisfied. The Italian Government in its submissions put forward other objective criteria which are said to show that the undertakings concerned satisfied the requirement of regular production laid down in the Fifth Code.

119. The Commission was thereby prompted to initiate, by letters dated 15 December 1995 and 2 February 1996, the procedure laid down in Article 6(4) of the Fifth Code. In that connection the Commission requested the Italian Government to submit its observations, whilst the other Member States and other interested parties were kept informed by publication of the decision initiating the procedure. Those concerned, including Casilina and Lamifer, communicated their observations to the Italian authorities and the Commission.

120. In its reaction to the initiation of that procedure the Italian Government, as may be gleaned from Part II of the preamble to the contested decisions, once again advanced the objective criteria which in its view enabled undertakings which had produced little or nothing at all in the reference period, to meet the requirement of regular production within the meaning of the second indent of Article 4(2) of the Fifth Steel Aid Code.

121. In regard to the objective criteria put forward account had to be taken of the fact that the low level or absence of production of certain undertakings in the reference period was not attributable to their desire to leave the steel market or to the ageing or uncompetitiveness of production plant but above all to the unfavourable economic circumstances at that time, which went hand in hand with a crisis on the steel market and financial problems for the undertakings concerned.

By keeping on their staff, organising training courses and requesting the authorities for aid for restructuring, they gave the appearance of wishing to confront the crisis in which they found themselves. It would also appear from other factors, such as the maintenance of energy supply contracts, that the limited production or absence thereof in the reference period was wholly due to the unfavourable economic circumstances and that the undertakings with good production facilities were desirous of resuming regular production at the right moment in order again to acquire a market presence.

122. Put bluntly, by means of these criteria, the Italian Government was arguing for an interpretation of the requirement of regular production which is also satisfied if the possibility of regular production is shown to have existed. The criterion established by the Commission in the decision of 12 December 1994 of being in production with at least one shift of eight hours duration for five days a week on the contrary entailed that regular production actually took place in the reference period.

In Part III of the preambles to both decisions the Commission rejected the alternative criteria put forward by the Italian Government. In addition, it explained why the provisions of the Fifth Code, which permit certain forms of aid, including closure aid, must be interpreted strictly. It subsequently indicated that, pursuant to the decision of 12 December 1994, criteria other than the Commission's were permissible but that they had to be able to demonstrate regular production during the reference period. However, the criteria put forward by the Italian Government were not able to do so; at most they could show that the undertakings concerned had been in a position to manufacture ECSC products. Where an extensive interpretation of the requirement, laid down in the Fifth Code, of regular production up to the date of notification was not permitted, the alternative criteria put forward by the Italian Government were therefore not acceptable. The Commission ended its statement of reasons with an explanation of why the argument put forward by the Italian Government concerning the poor economic situation cut no ice: in the reference period the total production of the relevant products on the Italian and European markets had gone down only very slightly or slightly. The very small production of the undertakings concerned could not therefore be attributed to that fact alone.

123. This reasoning reproduced here in summary form underlies both contested decisions in which the Commission decided that a number of the cases submitted by the Italian authorities, including Lamifer and Casilina, could not be considered for closure aid.

124. In assessing the reasoning underlying both decisions against the requirements governing the statement of reasons set out above, the Court of First Instance was entitled at paragraphs 274 to 280 of the judgment appealed against to conclude that it satisfied the requirements of lucidity and reviewability and that the factual and legal context was sufficiently clearly stated therein. The statement of reasons clearly sets out the factual context in which the closure aid has to operate, namely the structural sales problems on the steel market, and convincingly reflects the scope of the Fifth Code in that connection. The conclusion that under the code closure aid could be granted only if undertakings actually regularly producing in the reference period are removed from the market is supported by this reasoning. In its assessment of the reasoning underlying the contested decisions at paragraphs 273 to 280 of the judgment the Court of First Instance's view of the matter was the correct one. I share that view.

125. The argument that in its decisions the Commission ought to have dealt with the specific arguments raised by the applicants cannot avail them. The Court of First Instance rightly states at paragraphs 274 to 276 that, in the context of the procedure for examining aid under Article 6(4) of the Fifth Code, the Commission merely had to examine whether the Italian Government had succeeded in demonstrating, on the basis of objective criteria, that undertakings including the applicants, whilst not fulfilling the main criterion, could none the less be deemed regularly to have produced steel products. This is clearly stated in Belgium v Commission.

126. The applicants cannot infer from the fact that, responding to the request by the Commission and in accordance with Article 6(4), they made known their observations, that the Commission should furnish them with a reasoned statement in response to their observations. Those observations served merely to enlighten the Commission in connection with the decision pending before it. The Court's view on this matter is in my view thus also correct.

127. I therefore conclude that the criticisms in that part of the plea of the reasoning of the contested decisions and the relevant paragraphs of the judgment appealed against are unfounded.

128. In the second part of that plea the applicants assert that, at paragraphs 140 to 146 of the judgment appealed against, the Court of First Instance was wrong to state that the criterion of the highest possible production, which is based on the assumption that production is organised on the basis of three shifts, each of eight hours' duration, could also be applicable to the production of hot-rolled steel. The applicants reiterate their viewpoint expressed at first instance and produce in further elucidation thereof Questionnaire 2-20 ECSC of the Commission's statistical office. That is said to show that the production rhythm of rolling mills is lower than that of steel factories. Therefore, the criterion applied by the Commission of production at the rate of at least 25% of the highest possible production resulted in unwarranted outcomes for undertakings operating rolling mills.

129. If that part of the plea is interpreted as a mere repetition of the arguments raised at first instance, it is inadmissible. From the point of view of content I am also inclined to regard it as inadmissible because it is entirely directed against the facts as found at first instance.

130. That is not altered by the production on appeal of fresh material intended to show that the Court of First Instance incorrectly assessed the facts. In the first place the relevant questionnaire was produced in evidence for the first time on appeal. As such it cannot be accepted in evidence because the Court's appraisal on appeal is limited to points of law. Secondly, even if could be accepted in evidence on appeal, the questionnaire throws no new light on the alleged difference in production rhythm as between steel factory and rolling mills. Thirdly, the production of that evidence means that the plea raised is directed all the more starkly at the facts.

131. If this part of the plea were construed, albeit with some difficulty, as being directed at a lack of reasoning in the judgment appealed against, I consider it in the alternative to be manifestly ill-founded. The essential part of the Court of First Instance's reasoning is to be found in paragraph 141. Therein it is stated that the organisation of production on a basis other than three shifts per day is not ideal. The Court placed specific reliance on an experts' report submitted by Lamifer which confirms that for reasons relating to the efficiency of the heat cycle, that is to say, the need to avoid the huge consumption of gas necessary to cool the furnace, rolling mills normally operate on the basis of three shifts. On the basis of this finding as well the Court of First Instance was entitled to conclude that the Commission, in deciding that for rolling mills as well the calculation of the highest possible production had to be based on three shifts, did not manifestly infringe any Treaty provision or any rule of law enacted thereunder, nor did it misuse its powers.

132. The last part of the third plea is a mere repetition of the argument put forward at first instance that the Commission was wrong not to take account of the specific situation of Lamifer in the reference period. I am of the opinion that that part of the plea directed at paragraphs 179 to 181 of the judgment appealed against is also inadmissible.

133. In those paragraphs the Court of First Instance states that Lamifer's arguments that it could not produce at night for environmental reasons is factually incorrect. As the Court understands it, the municipal rules relied on by Lamifer simply impose on Lamifer the obligation to adapt its plant in order to maintain noise levels within acceptable limits. No appeal lies against this finding of fact.

134. Moreover, the reasoning on the basis of which the Court of First Instance concludes that Lamifer's plea must be rejected, because it is not borne out by the factual evidence adduced, is correct. In the alternative I consider that part of the third plea to be also manifestly ill-founded.

G - Casilina's and Lamifer's fourth plea: misuse of power from the point of view of unequal treatment

135. In my view the terms in which Casilina's and Lamifer's fourth plea are couched can give rise to confusion. If we take them literally, then the plea is plainly inadmissible. Under Article 51 of the ECSC Statute of the Court an appeal lies only on grounds of lack of competence of the Court of First Instance, a breach of procedure before it which adversely affects the interests of the appellant, or infringement of Community law by the Court of First Instance. Under Article 33 of the ECSC Treaty the Court can pronounce upon actions for the annulment of Commission decisions based on a misuse of powers. Likewise appeals against judgments of the Court of First Instance may also be based on such a plea. However, the Court of First Instance as such cannot be accused of a misuse of powers.

136. However, a closer analysis of that plea shows that the gravamen of the appellants' complaint is directed at that part of the judgment appealed against in which the Court of First Instance appraised and rejected the applicants' pleas accusing the Commission of infringing the prohibition on discrimination. The Court is said to have infringed Community law by incorrectly classifying the factual evidence adduced by the applicants at first instance. Viewed in that light the plea may be deemed admissible.

137. At first instance Casilina and Lamifer asserted that the Commission ought to have made for them the same exception from the requirement of regular production as for two other undertakings, OLS and Diano. During the reference period the production of those undertakings amounted to 21% of highest possible production. In regard to OLS the Commission observed in Part III of the preamble to Decision 96/678 that in the first quarter of 1993 this undertaking had undertaken an overhaul of the electrical and electronic equipment of the mill producing hot-rolled steel. Its production subsequently became regular again. Without the temporary halt to production necessitated on objective technical grounds production would have amounted to at least 28% of its highest possible production. That is why the Commission considered that on closure OLS was in regular production.

138. According to Part III of the preamble to Decision 97/258, Diano had repeatedly to halt production of its rolling mill for maintenance purposes during the reference period. Had it not been for the need on objective technical grounds to halt production, Diano would have achieved a capacity utilisation rate not of 21% but of 31% of highest possible production during the reference period. The Commission therefore had reason to believe that Diano was in regular production at the time of closure.

139. For Casilina actual production in the reference period was running at 14.2% of highest possible production. It relies on the fact that it had lay-offs during seven months of the period during which crude steel was not available at a reasonable price in relation to the cost of the manufactured product. Lamifer's production in the reference period was running at 15.2% of highest possible production. It relied on the rules of the local authorities, mentioned above, under which they were prohibited from producing at night-time.

140. The Court of First Instance rejected Casilina's and Lamifer's submission that they had been discriminated against in the contested decisions in contrast to OLS and Diano on the following grounds:

- in the reference period Casilina and Lamifer achieved production only equivalent to 14.2% and 15.2% of their capacity (paragraph 207);

- given that, under the strict rules imposed by the Fifth Code, the purpose of the requirement of regular production is to ensure that aid for closure achieves maximum effectiveness on the market so as to reduce steel production as substantially as possible, the refusal to allow aid for Casilina and Lamifer, which recorded production which fell short of the 25% minimum threshold by 10.8% and 9.8% respectively, is perfectly justified (paragraph 208);

- accordingly, the difference in treatment as between OLS and Diano - whose production was 4% below the minimum threshold - and that of the applicants is thus based on objective factual criteria in line with the goals which the Commission is under a duty to pursue under its ECSC industrial policy (paragraph 209);

- moreover, the failure by OLS and Diano to comply fully with the 25% criterion is justified in the case of OLS and Diano by the need to carry out essential maintenance work (paragraph 210);

- it follows that the reasons why OLS and Diano suspended production have been duly established, are the result of an objective situation, are limited in time and are justified by the need to continue production and by the intention to remain on the market (paragraph 212);

- in contrast, the alleged reason for the suspension of production by Lamifer has not been duly established. Moreover, the reason alleged by Lamifer is not justified by the need to continue production or improve efficiency (paragraph 213);

- as regards the justification adduced by Lamifer the Court refers to paragraph 181 of its judgment in which its justification was found to be factually incorrect (last indent of paragraph 211);

- the Court of First Instance held that, in light of the foregoing, the difference in treatment as between OLS and Diano, on the one hand, and Casilina and Lamifer, on the other, is therefore also objectively justified as far as the reason for the restricted production is concerned.

141. In this plea Casilina and Lamifer are submitting that in their case the unfavourable economic situation was an objective obstacle preventing them from observing the minimum production threshold, which was comparable to the technical impediments affecting OLS and Diano. If the economic situation had not been unfavourable both undertakings would have been comfortably able to exceed 25% of the highest possible production. Lamifer refers to the impossibility of being able to produce at night-time which is said to have adversely affected its whole production.

Finally, Lamifer points to the incongruous situation in which Diano with actual production of 16 807 tonnes in 1993 is permitted to benefit from closure aid whereas it with actual production of 23 542 tonnes in the same year is excluded from it.

142. In the judgment appealed against it is in my view convincingly demonstrated that the difference in treatment as between OLS and Diano, on the one hand, and Casilina and Lamifer, on the other, is due to the existence of objective differences of a certain weight related to the objectives which the Commission pursued in the Fifth Code. These differences are to be found in the much smaller shortfall against the yardstick for closure aid of 25% of highest possible production in the case of OLS and Diano (4%) than in the case of Casilina and Lamifer (10.8% and 9.8% respectively) and in the justifications for those shortfalls. The first two cases involve objectively determinable technical reasons for a limited time which evince a desire to carry on production and to continue to have a market presence. In the last two cases the justifications given are either factually incorrect (the case of the prevention of night-time working with Lamifer) or connected with incapacity to continue producing, given the market price for raw materials (the case of Casilina).

143. In the case of Lamifer the Court was entitled without more ado to assume that the justification produced for the shortfall in regard to the production limit was inadequate because it was in fact non-existent. In the case of Casilina the justification given was by its nature insufficient. If, however, in a given market situation an undertaking can no longer produce whereas other comparable undertakings can do so that points to a subjective impediment which moreover says much about Casilina's competitive deficiencies. The Court of First Instance was therefore entitled to consider that the justification put forward by Casilina was insufficient and certainly evinced no desire to continue production and to remain in the market.

144. The argument raised by both appellants on appeal that the unfavourable economic situation affecting them was just as much an objective justification as the need to carry out technical maintenance in the cases of OLS and Diano is incorrect on the face of it. Indeed, the unfavourable economic situation was an objective fact for all undertakings eligible for closure aid. That this presented an obstacle for the appellants, as opposed to the great majority of the other companies in line for closure aid in satisfying the criterion of regular production indicates a subjective inability to compete properly. Where the Fifth Code states at point II of the preamble that only competitive undertakings can be considered for closure aid, the appellants' arguments rather confirm the correctness of the Court of First Instance's view than detract from it.

145. Also the argument put forward by Lamifer that its actual production in the reference year was higher that that of Diano does not carry conviction. The criterion of 25% of the highest possible production was intended to ensure that only undertakings which in the reference period maintained regular production with their production capacity could be considered for closure aid. That the smaller undertaking Diano better satisfied that criterion than the considerably larger undertaking Lamifer is characteristic of the difference in ability to continue in production under difficult market conditions. Concerning this point the dispute in absolute terms gives no indication of the actual production as between both undertakings.

146. I therefore find that Casilina's and Lamifer's fourth plea is unsubstantiated.

VIII - Costs

147. Under Article 122 of the Rules of Procedure, where the appeal is unfounded the Court is to make a decision as to costs. Since the appellants have been unsuccessful, they must be ordered to pay the costs in accordance with Article 69(2) of the Rules of Procedure, it being understood that they must also, jointly and severally, pay the costs incurred by the Commission.

IX - Conclusions

148. In light of the foregoing I propose that the Court should:

(a) dismiss the appeals in their entirety;

(b) order the appellants to pay their own costs and, jointly and severally, incurred by the Commission.