OPINION OF ADVOCATE GENERAL SIR GORDON SLYNN

DELIVERED ON 5 APRIL 1984

My Lords,

This is an action brought by a French steel producer called “Alpa” which is a wholly owned subsidiary of another French steel producer, “Usinor”, for the annulment of “the decision” contained in a letter from the Commission dated 22 June 1983.

At the material time the production of steel was subject to the quota system contained in Commission Decision No 1696/82 of 30 June 1982 (OJ 1982, L 191, p. 1). Article 2 (4) of the Decision provides as follows:

“For the purposes of this Decision, any group of concentrated undertakings within the meaning of Article 66 of the Treaty shall be regarded as a single undertaking even if such undertakings are located in different Member States”.

Article 14 of the Decision, as amended by Commission Decision No 2751/82 of 6 October 1982 (OJ 1982, L 291, p. 8) provides as follows:

“If, by virtue of the scale of the abatement rates set in respect of a given quarter, the quota system creates exceptional difficulties for an undertaking, the Commission shall make suitable adjustments to its reference production and/or reference quantities for the category in question, provided that the undertaking makes an application to this effect during the first two months of the relevant quarter in the following instances:

....

— in the case of category V: — total production of the products listed in Article 1 did not exceed 700000 tonnes in 1981, and — production of categories IV, V and VI comprises at least 90% of the total production of the undertaking in 1981, and — production of category V represents at least 30% of the production of categories IV, V and VI in 1981, and — the abatement rate for category V exceeds 40%”.

Alpa produces concrete-reinforcing bars (Category V products) from scrap. It is the only undertaking associated with Usinor which produces Category V products. It appears to be. common ground that, if Alpa is looked at in isolation, its production satisfies the conditions set out in Article 14 and Alpa would, in consequence, be entitled to an adjustment of its reference production and/or reference quantities if it so requested and if it faced exceptional difficulties arising from the scale of the abatement rates in a given quarter. By letter dated 23 February 1983, which was addressed to Viscount Davignon, the Commissioner responsible for, inter alia, the steel quota system, the President of Alpa requested an adjustment to Alpa's references for Category V products under Article 14. The request did not state expressly that the adjustment was requested for the first quarter of 1983 but this seems to be implied in the letter because it refers to the position in that quarter. At the end of the letter the President of Alpa requested the Commission to consider Alpa a distinct production centre in the Usinor group and to grant the adjustment: Viscount Davignon replied by letter dated 5 April 1983. So far as can be seen, this letter was not received by Alpa. By letter dated 26 May, Alpa submitted a similar request, stated expressly to relate to the second quarter of 1983 and once again addressed to Viscount Davignon. By the letter challenged in this action, one of the Directors in Directorate E of Directorate-General III, which is the Commission directorate with responsibility for steel matters, wrote to the President of Alpa enclosing Viscount Davignon's letter of 5 April which, it was said, replied to all the points raised in Alpa's previous letters. Viscount Davignon's letter states that, in consequence of Article 2 (4) of Decision No 1696/82, only Usinor could submit a request under the provisions of the Decision and that Usinordid not fulfil, the conditions for benefiting from Article 14 because of its size.

In brief, Alpa's case is that the letter of 22 June constitutes a decision refusing to make an adjustment under Article 14. Its purported legal basis is Article 2 (4) of Decision No 1696/82 and Article 14 itself. In consequence, it is unlawful and should be annulled because (1) Article 2 (4) is unlawful in so far as it assimilates Alpa to Usinor and (2) Article 14 is unlawful in so far as it discriminates against undertakings which form part of a group.

The Commission has raised several objections to the admissibility of the action. It maintains that the letter of 22 June does not constitute a decision because (1) on its true construction, Alpa's letter of 26 May is a request for the Commission to amend or disregard the provisions of Decision No 1696/82; (2) the letter of 22 June contains no indication that it is an _ act of the Commission; (3) the letter of 5 April was a personal letter from Viscount Davignon, not a letter from the Commission as a whole or one written by Viscount Davignon on behalf of the Commission; (4) neither the letter of 22 June nor that of 5 April lays down a rule or obligation because they simply refer to the rules contained in Decision No 1696/82 and applied in the decision addressed to Usinor fixing the quotas for the second quarter of 1983; (5).the letter of 5 April is just an explanatory note which explains the existing general provisions and refers to an individual decision having legal effect, adopted with regard to another undertaking (Usinor); (6) Article 2 (4) was applied in the Commission decision fixing the quotas for the Usinor group in the second quarter of 1983 (this decision was challenged by Usinor in Case 103/83) but not in the letter of 22 June; (7) Article 14 was not applied in the letter of 22 June because its inapplicability to Alpa flows directly from Decision No 1696/82 without the need for an individual decision.

The Commission has stressed the importance not only for this case but for other cases of a ruling on admissibility. I propose to deal only with the circumstances of this case.

Alpa's letter of 26 May was quite clearly a request for an adjustment under Article 14 in respect of Category V products. Equally clearly, no doubt with Article 2 (4) in mind, Alpa was at pains to stress , its separatenessį following a restructuring of thè Usinor group, and the letter includes a second request that Alpa be considered a distinct production unit.

On any view the Commission's letter of 22 June refers to Alpa's letter of 26 May as a request for the application of Article 14 in the second quarter of 1983 and treats the letter of 5 April as replying to it. Accordingly the argument that Alpa did not in fact make such a request or that the Commission (by its officials) did not understand it as making such a request cannot be sustained.

This is so even if, as part of its overall request or alternatively, Alpa was asking to be treated as a separate undertaking for the purposes of Article 14, or to be granted a dispensation from the strict application of Article 14.

The primary reason for rejecting the request was that Usinor alone was capable of applying under Decision No 1696/82 for an adjustment under Article 14. On the evidence available it does not seem that any application was made by Usinor under Article 14 in respect of the second quarter. The decision challenged by Usinor in Case 103/83 is that which fixed the quotas. That decision was made on 27 April 1983 before the Commission had received a request from any member of the Usinor group for an adjustment in respect of the second quarter. There was accordingly no individual decision addressed to Usinor under Article 14. Whether Alpa was entitled to make an application alone or on behalf of the group (since it is the group of concentrated undertakings which is to be regarded as a single undertaking by virtue of Article 2 (4) rather than a controlling undertaking) seems to me to be an arguable question, so linked to the merits of Alpa's claim that it should not at the outset be regarded as being inadmissible.

Reduced to its essentials, the Commission's next point is that the letters of 22 June and 5 April do not constitute a decision because they simply inform Alpa of the provisions of Decision No 1696/82, the inapplicability of Article 14 flowing directly from them without the need for an individual decision. This argument should be rejected. Article 14 is not a provision which applies automatically. It is necessary for an undertaking to request its application and for the Commission to decide whether or not to accede to the request. The Commission is, in my view, bound to reply to a request properly made, the reply taking the form of a decision which may be challenged under Article 33 of the Treaty. In consequence, when the Commission responds to the request by refusing to apply Article 14, that reply constitutes a decision which can be challenged: in it, the Commission determines the legal position of the undertaking with regard to Article 14.

In substance, the letters of 22 June and 5 April together constitute a decision denying Alpa's legal right to claim an adjustment under Article 14 for the reasons set out in the letter of 5 April. Counsel for the Commission maintained, however, that the letters do not comply with the formal requirements of a decision, relying on Cases 53 and 54/63 Lemmerz-Werke v High Authority [1963] ECR 239.

No formal requirements for a decision are set out in Article 14 of the ECSC Treaty itself. Whether a communication constitutes a decision or not is to be decided by looking at its substance rather than its form (see, for example, Cases 1 and 14/57 Usines à Tubes de la Sarre v High Authority [1957-1958] ECR 105 at p. 114). In the Lemmerz-Werke case (at pp. 247-248) the Court expressly rejected the view that a measure cannot be considered a decision simply because it fails to comply with some inessential requirement of form “if the fundamental conditions underlying the concept of a decision within the meaning of the Treaty are otherwise satisfied”. One of these fundamental conditions is that the measure has actually been taken by, in this case, the Commission, i.e. the members of the Commission acting together or one of them (or an official of the Commission) acting under powers delegated by the Commission's members acting together (Cases 43 and 63/82 De Vereniging ter Bevordering van het Vlaamse Boekwezens Commission, [1984] ECR 19 at para. 14; Cases 8-11/66 Cimenteries v Commission [1967] ECR 75).

In the circumstances it seems to me that the true test is whether it is apparent from the tenor of the communication and the context in which it is made that it either is, or is to be taken as representing, a determination made by the members of the Commission. If the Commission is seeking to establish that a decision was validly taken, it will be required to prove that the necessary formalities were complied with. As against another person; however, the Commission may have so acted that it cannot be heard to deny, in proceedings before the Court, that what has all the appearances of a decision was in truth a decision.

In the present case, the letters in question were not sent unsolicited (as was the case in Lemmerz-Werke v High Authority). They constituted a response to a request for the Commission to act under Article 14. The Commission is obliged to answer by adopting a decision on the request which may be challenged under Article 33 of the Treaty. When the undertaking receives the reply to its request, it is, for these reasons, entitled to believe, on the basis of the nature of the correspondence, that the reply has been adopted by the Commission unless the reply states expressly that it is not made by or on behalf of the Commission, alternatively that if a member of the Commission (or an official) replies to a request for the Commission to act he is doing so under delegated powers. Here the letter of 22 June, which was signed by an official of the Commission, indicates that he was authorized to write by Viscount Davignon. The substance of the reply to Alpa's request is contained in Viscount Davignon's letter of 5 April. Both letters indicate that the signatories realized that Alpa had made a formal request to the Commission to act under Article 14, not a personal request to Viscount Davignon. Both letters purported to reply to the requests made on behalf of the Commission. To seek to say that Viscount Davignon was merely sending a personal letter to the President of Alpa seems to me to ignore the real purpose and effect of the correspondence. This letter went from the Vice-President of the Commission on behalf of the Commission to the President of Alpa on behalf of Alpa. In my opinion, as against the Commission, that is sufficient to establish, for the purpose of the admissibility of the action, that the reply represents a decision adopted by the Commission.

The question whether, as a matter of law, a measure which appears to be a decision was validly adopted by the Commission goes to the merits of the case, not admissibility. In consequence, should counsel for the Commission's assertion, that Viscount Davignon did not act on behalf of the Commission, be upheld, the proper course would be to find the purported decision a nullity (cf. the solution proposed by Mr Advocate General Lagrange in Cases 15 and 29/59 Knutange v High Authority [1960] ECR 1 at p. 12) and that the Commission failed to act as it should have acted by replying to the application. In my opinion, however, counsel for the Commission did not make this assertion out. It is not sufficient simply to state that a member of the Commission replied on his own account to a formal request for the Commission to act. There must be evidence to support this. None has been produced. The proper construction of the letters is to the opposite effect.

Accordingly I would not reject this application as being inadmissible in limine.

Alpa's first ground for annulling the decision contained in the letters is that the Commission was wrong to have transposed to the steel quota system adopted under Article 58 of the Treaty the test of control used in Article 66 and defined in Decision No 24/54 of 6 May 1954 (OJ 1954, p. 345, English Special Edition 1952-1958, p. 16); the concept of a concentration between undertakings, it is said, is part of the competition rules in the ECSC Treaty and it is both unlawful and inappropriate to apply it, outside that context, to the steel quota system. The assimilation of Alpa to the rest of the Usinor group gives rise to discrimination between Alpa and independent steel producers of a similar size who, like Alpa, produce Category V products, and nothing else, from scrap. The Commission's case is that Article 2 (4) is justified in order to ensure that the steel quota system operates simply and effectively. The controlling undertaking in a group is in a position to determine the production and delivery policy of each member of the group; it is therefore necessary to designate the controlling undertaking as the sole undertaking which is the subject of rights and duties under the quota system.

It has not, in my view been shown that the criterion adopted in Article 2 (4) is inappropriate or arbitrary or that, taken by itself, it is discriminatory. The advantages of Article 2 (4) are obvious. Quotas are fixed for a group of concentrated undertakings as -a whole, rather than for each undertaking in the group, and are calculated on the basis of the reference production and quantities of the group. This lends flexibility to the quota system. Groups can organize production as they wish without suffering a reduction in the quotas. For example, so far as Category V products are concerned, Usinor has rationalized production by ceasing production in its other steel plants and concentrating it on Alpa. For the calculation of the quota for Category V products, reference is made to the position of the group as a whole, not to Alpa alone. In consequence, account may be taken, for Alpa's benefit, of any production of Category V products of other members of the group during the relevant reference period.

Article 2 (4) cannot, however, take away the separate identity of different undertakings or affect other rights arising under the Treaty. Neither consequence, in my view, flows from the proper construction of Article 2 (4). It provides that a group of concentrated undertakings “shall be regarded” as a single undertaking. This means that, although the undertakings retain their separate identity as a matter of law, they are to be treated for the purposes of the Decision as one undertaking. As a result, when a decision is addressed to a controlling undertaking, it binds all the undertakings in the group through the nominal addresses: It is so addressed on behalf of the group of concentrated undertakings. Each undertaking in the group may therefore challenge the Decision so far as the Decision concerns it.

Whilst it may be more convenient for communications from the Commission to be addressed to the controlling undertaking in a case like the present, it cannot be said that Article 2 (4) excludes another member of the group from making an application to the Commission, either on its own behalf or on behalf of the “concentration of undertakings”. Where the undertakings of a group engage in different specializations, it may indeed in some cases prove to be more convenient for the Commission to be in direct contact with the undertaking concerned with a particular technical matter instead of going through the controlling undertaking. This does not detract from the basic principle enunciated in Article 2 (4), that all the undertakings in the group are to be treated together and not separately for the purposes of e.g. Articles 5, 9 and 14. In the event of an apparent conflict between the controlling undertaking and another undertaking in the group (of which there is no suggestion in this case), the Commission might be justified in giving preference to the former but, in the absence of such a conflict, the Commission would not, in my view, be entitled to ignore a formal request from an undertaking in the group simply because it was not made by the controlling undertaking. There is no provision in the Treaties or the Decisions setting up the steel quota system which, in my opinion, authorizes this and it is not necessary for the proper operation of the quota system.

For these reasons, it is my opinion that Article 2 (4) of Decision No 1696/82 has not been shown to be unlawful. On the other hand, the request for an adjustment under Article 14 was properly made by Alpa, either alone or on behalf of the group, and the Commission could not lawfully decline to adopt a decision in response to it on the ground that the request could only be made by Usinor.

In the letter of 5 April, the Commission also said that the conditions laid down in Article 14 excluded its application to “Usinor”, by which the Commission seemed to have meant the Usinor group, because of its size. Moreover, although the Commission has not disputed that Alpa alone fulfilled the conditions for applying Article 14, the Commission contends that the quota system does not cause Alpa exceptional difficulties because it is able to operate at 65.8% of capacity, whereas the average for its competitors in the Community is 42.5%. Counsel for Alpa has pointed out that, even so, Alpa is incurring heavy losses for an undertaking of its size and that, if the Commission had any regard to Alpa's position, a different decision should have been arrived at.

Counsel for the Commission sought to justify the Commission's application of Article 14, as amended by Decision No 2751/82, on the basis of essentially the same factual arguments put to the Court in Cases 140, 146, 221 and 226/82 Walzstahl and Thyssen v Commission,21 February 1984. In short, demand for reinforcing bars dropped considerably in 1981 and 1982, because of stagnation in the construction industry, and brought with it a drop in prices. The Commission decided that it was necessary to assist “certain small and medium-sized undertakings” whose production depends almost exclusively on products in Categories IV, V and VI and to a considerable extent on the production of reinforcing bars. This was apparently intended to refer, so the Commission say in their pleadings, to those undertakings which produce reinforcing bars from scrap and it was intended to assist them by giving an across-the-board reduction of the abatement rates. That aid was given in Decision No 533/82 of 3 March 1982 (OJ 1982, L 65, p. 6) in connection with the basic rules set out in Decision No 1831/81 of 24 June 1981 (OJ 1981, L 180, p. 1), as amended. Other undertakings (the larger sized undertakings) were not intended to benefit from this adjustment to the abatement rates.

So far as the quota system governed by Regulation No 1696/82 is concerned, the relaxation for these smaller undertakings was made by Decision No 1698/82 of 30 June 1982 (OJ 1982, L 191, p. 43) to the extent necessary to ensure that the situation of those smaller undertakings was not “lastingly jeopardized”.

As a result of developments which took place after the adoption of Decision No 1698/82, however, the Commission decided to switch over to a case by case examination of the matter. In consequence, it amended Article 14 of Decision No 1696/82 (by Decision No 2751/82), so as wallow the smaller undertakings to apply for an adjustment of their reference production and/or reference quantities.

As a result of this change to a case by case review, it cannot, in my view, be said that the line of reasoning which led the Court to annul Decision No 1698/82 in the Walzstahl and Thyssen cases, applies here. In addition, it has not been suggested that the amendment of Article 14 was not justified by reason of a radical change on the iron and steel market or any unforeseen difficulties in the application of Decision No 1696/82 within the meaning of Article 18 (1) thereof.

On the face of it the explanation both for the adjustment made in Decision No 533/82 and the amendment to Article 14 made by Decision No 2751/82 is that the small or medium sized producers who made only Category IV, V and VI products, and predominantly Category V products, would have difficulty in surviving in existing market conditions, whereas a bigger concentration could support the difficulties of its Category V “sectors” by other activities particularly as reinforced concrete bars accounted for not more than 5% of total products. There is no reference to the difference in methods of manufacture or basic materials used.

The Commission, however, in its Rejoinder explained that the reason for differentiating by size was motivated by the fact that the small producers generally use scrap, the integrated units iron ore. If the Commission“ had” made the distinction for the purposes of Article 14 on the basis that scrap users needed protection, then it would be very difficult to justify the exclusion of a company like Alpa which, exceptionally as a company in a group, used scrap. However, it seems to me to be right to proceed on the text of the Decision that size was the predominating consideration and that the material used was the subsidiary reason. In such a case it seems to me that the distinction drawn on the basis of size was one which it was open to the Commission to make. It follows that when a small company uses iron ore it is as much entitled to the benefit of Article 14 (third paragraph) as one which uses scrap to make reinforced concrete bars. Conversely if a company, like Alpa, uses scrap it is as much to be treated as part of an integrated group as one which uses iron ore. On this footing it does not seem to me that unlawful discrimination has been shown.

I do not find it possible to accept the argument that, since in the recitals to Decision No 2751/82 there is a reference to undertakings, that must mean individual undertakings as defined in Article 80 of the ECSC Treaty, so that the introduction of the third paragraph to Article 14 of Decision No 1696/82 involves reading “undertakings” in Article 14 in the same sense, so that the deeming provisions of Article 2 (4) of that Decision do not apply. If that argument were right it would, of course, enable Alpa to make a separate application to be treated separately. It is not in my view possible to achieve this result without doing violence to the structure of Decision No 1696/82, where it is clearly intended that Articled (4) shall apply, unless clearly excluded. Here nothing is said in the amendment itself to produce such an exclusion.

In the result I conclude that even though the Commission was wrong to reject Alpa's application for the primary reason given, it was entitled to do so on the basis that Alpa must be treated as part of the Usinor group of concentrated undertakings; that group was to be regarded as a single undertaking and its production was not such as to entitle an application to be made under Article 14 of Decision No 1696/82.

I would accordingly dismiss the application but, in all the circumstances, order each side to bear its own costs.