OPINION OF ADVOCATE GENERAL SIR GORDON SLYNN

DELIVERED ON 30 NOVEMBER 1983

My Lords,

This is an action brought by a Dutch steel producer (Estel), which is a member of the European Confederation of Iron and Steel Industries (“Eurofer”), for the annulment of a decision of the Commission dated 13 August 1982 which imposed a fine of 3655590 ECU on Estel. The basis of the decision was that, in the third quarter of 1981, Estel infringed Commission Decision 1831/81 of 24 June 1981 (OJ L 180, 1. 7. 1981, p. 1) in exceeding its production quota for Category la products by 30909 tonnes, its production quota of Category lb products by 13842 tonnes and the amount of Category Ia products which it was authorized to deliver in the common market by 19951 tonnes. In the alternative to the claim for annulment Estel asks that the fine should be reduced.

There is little or no dispute as to the facts. The issues concern the interpretation and proper application of the Decision.

Under Article 5 of the Decision the Commission is required to fix each quarter, for each undertaking concerned, its production quotas and the part of such quotas as may be delivered in the common market on the basis set out in the Decision. Article 12 provides for fines to be imposed for breach of the quotas established by the Commission.

As to the claim for annulment, the first ground relied on by Estel is that the Commission wrongly included in the total, by which it found that Estel had exceeded the quota for Category la products defined in Article 1 of the Decision, some 10548 tonnes used for making small welded tubes, which were covered by Article 10 of Decision 1831/81. That Article provides:

“With regard to products of Category la which are used in the form of hot-rolled products for the production in the Community of welded tubes with a diameter not larger than 406.4 mm, the Commission shall, at the undertaking's request accompanied by proof of use for such a purpose, adjust the quota and authorize the relevant deliveries.”

By letter of 29 July 1981 the Commission informed Estel of the quotas fixed for Estel, and the parts thereof which could be delivered on the common market during the third quarter of 1981. The detailed figures are given in the Report for the Hearing and I do not repeat them. By letter of 24 November, Estel requested an adjustment under Article 10. The Commission made the adjustment by a decision contained in a letter of 3 February 1982. The adjustment came to 10548 tonnes less than the amount requested by Estel. The difference is attributable to the fact that Estel and the Commission used different methods of calculating the adjustmeat which should be made. Estel did not, however, bring proceedings to challenge the decision making the adjustment,..n consequence, it remains bound by that decision and it did exceed the quota fixed, whatever the merits of its interpretation of Article 10.

It has been contended that, since there was at the time considerable uncertainly surrounding the correct interpretation of Article 10, it would be wrong in the light of the principle nullum crimen sine lege, to hold that Estel had infringed the decision. I do not accept that argument. It was plain that the failure to respect the quota as originally fixed would constitute a breach of the Decision unless an ex post facto adjustment were made under Article 10. There may have been a difference of view as to the precise manner in which Article 10 was to be applied: Estel took the view that the adjustment would cover the entire amount of any excess but subsequently discovered that the Commission's interpretation of Article 10, which involved taking an overall view of the figures rather than, as Estel contended, examining the position of individual customers, led to a different result. That is not in my view sufficient to bring the principle relied on, assuming as I do that it can be relied on as a matter of Community law, into play. In any event, Estel could have sought to protect its position by challenging the Commission Decision adjusting the quota. Whether it would have been successful is another matter which it is not necessary to consider for present purposes.

Estel's second argument is that the Commission was wrong to have included in the total, by which it was said that Estel had exceeded both the production quota for Category la products and the part of the quota which could be delivered on the common market, a further 18525 tonnes. This quantity, it is said, consisted of Category la products delivered to other undertakings in the Community for re-rolling. The Commission does not appear to dispute this. So far as can be seen the excess arose because:

(1) Eurofer operates for its own members a quota system separately from the quota system laid down by the Decision;

(2) the Eurofer. quota system does not take into account deliveries for re-rolling, whereas the system introduced by the Commission does;

(3) Eurofer requires its members to adjust the quotas fixed by the Commission to the amount of the Eurofer quotas by selling and exchanging their quotas under Article 11 (4) of Decision 1831/81;

(4) in order to carry out these operations, the members of Eurofer give it forecasts of the quantities to be delivered for re-rolling in the forthcoming quarter;

(5) Estel did not understand the importance of its forecasts and allowed its actual deliveries to exceed them;

(6) had it not been obliged by Eurofer to sell or exchange part of its quota, there would have been little or no excess.

These factors indicate that Estel's failure to respect the production quota and limit its deliveries on the common market can be attributed in part to Eurofer's own-internal arrangements and in part to Estel's uncertainties concerning the interaction between these arrangements and the quota system set up by Decision 1831/81. This does not establish that the Commission was wrong to find that Estel had infringed the Decision. The terms of the Decision are in this respect clear and it was for Eurofer and its members to adjust themselves to the system laid down in it.

Accordingly, it does not seem to me that Estel succeeds in establishing either of its first two main heads of claim. The remaining grounds go principally to the imposition of the fine.

It is to be recalled that the system of production quotas introduced by Decision 1831/81 is based on Article 58 of the ECSC Treaty. The Commission's power to impose fines derives from Article 58 (4), which provides that it “may impose upon undertakings which do not comply with decisions taken by it under this Article fines not exceeding the value of the tonnages produced in disregard thereof”. After the hearing in this case it seemed to me clear from Article 58 (4) that the Commission has a discretion as to the imposition of a fine. (See now also Case 188/82 Thyssen ν Commission16 November 1983 at paragraph 20 of the judgment.) The only express limitation on that discretion concerns the upper limit on the amount of the fine that may be imposed, though the exercise of this discretion may also be limited by the general principles of law upon which the legal order of the Community is based (see, for example, Case 179/82 Lucchini ν Commission,19 October 1982, per Advocate General Reischl at page 9 of the typescript).

Article 12 of Decision 1831/81 sets out the terms on which the Commission is to exercise its discretion under Article 58 (4) in respect of infringements of the Decision. So far as is relevant, it provides as follows:

“A fine, generally of 75 ECU for each tonne in excess, shall be imposed on any undertaking exceeding its production quotas or part of such quotas which may be delivered on the common market.

If an undertaking's production exceeds its quota by 10°/o or more, or if the undertaking has already exceeded its quota or quotas during one of the previous quarters, the fine may be up to double that amount per tonne. The same rules shall apply to any excess over the quantities which may be delivered on the common market...”.

In point 9 of the preamble to the Decision, the Commission explains the reasons for adopting Article 12 as follows:

“In order to ensure the effectiveness of the quota system, it will be necessary for any excess to be fully penalized by means of a fine based on each excess tonne produced.

The level and frequency of excess during the period when production quotas apply must also be taken into account when fines are set.”

The Decision imposing the fine states that, where both the production quota and the quantity which may be delivered on the common market are exceeded, the fine should be calculated on the tonnage of the higher infringement and on 20% of the tonnage of the lower, Counsel for Estel has submitted that the excess tonnage delivered on the common market is the same as part of the excess production of Category Ia products. In imposing fines in respect of both infringements of Decision 1831/81, the Commission has in fact imposed a double penalty on the same tonnage which, in the aggregate, results in a fine at a rate higher than that authorized by Article 12. This is said to be contrary to Article 12 of Decision 1831/81, Article 58 of the Treaty and the general principles of Community law. It is also said that the Commission gave insufficient reasons for acting in this way in the Decision imposing the fine. In my opinion it follows from Article 5 and other provisions of the Decision (e.g. Article 11 (1) to (3)) that undertakings are subject to two duties:

(1) not to exceed the production quota and

(2) not to deliver in the common market more than the authorized amount.

Estel does not challenge the fact that limits are imposed both on the amounts that can be produced and on amounts that can be delivered in the common market. Article 12 sets out the criteria for calculating the fine to be imposed in the event of a breach of either duty. Counsel for Estel has relied particularly on the use of the. word “or” in the first sentence of Article 12. In his submission this is to be read disjunctively so as to exclude the imposition of two fines where there is a breach of both duties. Otherwise it is said that in respect of the same steel a fine in excess of 75 ECU is imposed — in this case 75 plus 15 ECU for the same products.

This argument seems to ignore the essential scheme of the Decision. The aim is to stop two quite separate breaches of the quota system. Delivery of an excess quantity in the common market is not to be regarded as a merely incidental feature of excess production, where both occur. The limitation imposed on deliveries to be made in the common market has a separate justification — as the fifth point of the preamble explains, it is to restore the balance of supply and demand by preventing undertakings from concentrating too much on the common market. The objective is not achieved if there is no separate sanction where an undertaking, having produced in excess of its quota, delivers the excess on the common market instead of exporting it.

Article 12, in my view, is to be read as meaning that a fine may be imposed for each of the violations referred to. If both occur, both may be the subject matter of a fine. It has not been suggested that cumulation, whether total or, as in this case, partial, would result in the limit on the fine set out in Article 58 (4) being exceeded. There is accordingly no conflict with that Article. Accumulation of fines is not in my opinion contrary to the general principles of Community law which have been referred to, because, in this case, the two penalties relate to two distinct infringements of the Decision; this is not a case of a double penalty for the same act.

Councel for Estel has said that, through certain of its officials, the Commission gave Eurofer to believe that a double penalty would not be imposed. The formal statement of the Commission's position is to be found in Article 12. For the Commission to be bound by any other definition of its position there would have to be evidence of some formal declaration (e.g. Case 21/64 Macchiorlati Dalmas v High Authority [1965] ECR 175 at page 189), at any rate in the absence of an estoppel which is not in question here.

The reasoning sec out in the Decision of 13 August 1982 explains how the Commission arrived at the fine it imposed. This has enabled Estel to challenge the lawfulness of the method of calculation used. It seems to me that the statement of reasons was sufficient.

It is then contended that the Commission wrongly failed to take into account the circumstances giving rise to the infringements of Decision 1831/81 when fixing the fine and failed to give adequate reasons for its decision in not doing so. The Commission's case is that, under Article 12 of Decision 1831/81, fines are fixed solely in relation to the degree to which a quota has been exceeded and not by reference to the special situation of each undertaking; there was no need to state this in the decision imposing the fine. The fine is automatic.

In his opinion in Case 188/82 Thyssen ν Commission (at page 5 of the typescript) Mr Advocate General VerLoren van Themaat indicated that the maxim nulla poena sine culpa applied to fines imposed pursuant to the Treaty. I agree. The principle is, in my view, sufficiently established in the laws of the Member States as to form part of the general principles of Community law. That principle does not, however, in itself preclude the Commission from imposing fines at a specified rate. It may prevent the Commission from imposing a fine at that rate in cases where, for example, the infringement of the Decision arises wholly or partly from an act of the Commission itself. If, as in Lucchini ν Commission (see paragraphs 7 and 8), the Commission applies a specified rate as a general rule but does not exclude the possibility of departing from it if the circumstances of the infringement fall outside the norm, it is not bound to give reasons why it imposed a fine at the rate specified. Reasons should be given, however, if the rate specified is not applied.

In the present case the Commission gave clear indication that the rate of 75 ECU per tonne would be applied “generally”; in the events specified in the second sentence of Article 12, the fine “may” be up to double that amount. The Commission has maintained that a fine at the rate of 75 ECU per tonne is to be imposed “automatically”. If “automatically” means that the flat rate is to be applied irrespective of the surrounding circumstances, it seems to me to be contradicted by the plain words of Article 12. That wording, like the provision in question in the Lucchini and the Thyssen cases recognizes that exceptions may be made to the normal practice that the specified fine is imposed. “Generally” does not mean “universally”; it means “usually”. Moreover the Commission has not itself applied the rate “automatically” in this very case. Article 12 provides that the rate of 75 ECU per tonne also applies to any excess over the quantities which may be delivered in the common market. The Commission imposed a fine equal to 15 ECU per tonne. In a case where both the production quota and the quantity which might be delivered on the common market were exceeded, the Commission chose to fine the one breach at the rate of 75 ECU and the other at a reduced rate of 20%, which comes to 15 ECU. This shows that the Commission is prepared to take account of factors other than the mere tonnage involved when it imposes a fine.

Estel's contention, as I understand it> is that the Commission wrongly refused to take into account the surrounding circumstances when it fixed the fine. On the pleadings this seems to be accepted by the Commission so far as the excess production is concerned. Even, however, if the correct analysis is that the Commission did not consider the surrounding circumstances sufficiently exceptional to justify departing from the flat rate of 75 ECU per tonne, save in respect of the failure to comply with the limit on the amount which could be delivered in the common market, the Court has unlimited jurisdiction under Article 36 of the Treaty in respect of the fines and may substitute its own assessment of the circumstances for that of the Commission.

One set of circumstances relied on concerns the Category la products delivered to other undertakings in the Community for re-rolling. Estel's explanation of the position amounts to a plea that the excess was not intentional but arose partly by mistake and partly by its commitments to Eurofer. This is not, to my mind, sufficiently exceptional to justify reducing the fine. Once the quotas had been determined and the exchanges and sales required by Eurofer had been made, it was foreseeable that, if Estel increased its commitments, it would exceed the quotas and be liable to be fined unless it could obtain quotas or parts of quotas from other undertakings. In producing and delivering excessive quantities for re-rolling without ensuring that they were covered by a quota in the third or a following quarter, Estel clearly infringed Decision 1831/81. The argument that deliveries for re-rolling did not disrupt the market is not a ground for reducing the fine. Excess production does not cease to be excess production simply because it is delivered for re-rolling: undertakings producing excessively for re-rolling compete with those producing for the same purpose but within the limits of the quota. Estel's argument that the principle of proportionality was violated does not seem to me to be relevant; it adds nothing to the discretion inherent in Article 12, which in respect of these matters cannot be said to have been wrongly exercised. I consider that the Commission was right not to give effect to this argument.

Then it is said that the excessive production of Category la and lb products, less the excessive amount delivered on the common market (i.e. 24800 tonnes) can be attributed to special problems linked to deliveries on the North American market. According to Estel, it is the principal supplier to the North American market. Orders are placed six to nine months before the date of delivery and half the total deliveries are made in the third quarter of the year alone, partly because Estel's most important customers are based in the Great Lakes region and are only accessible, for climatic reasons, between the end of the second quarter and the beginning of the fourth. Orders for the North American market were placed in the beginning of 1981, long before Decision 1831/81 was adopted. Estel attempted to cover itself by exchanging and buying quotas but insufficient were available to cover it completely. There are valid arguments both ways on this point. On the one side the Commission says that Estel should have foreseen this problem and cut down on its sales to other customers in the third quarter. There is considerable force in this argument. On the other hand Estel does seem to have cut down on its other exports in the third quarter, though there is insufficient evidence to decide whether it cut back as much as it was able to. It can also be said that 1981 was an exceptional year in that the quota system established by Commission Decision 2794/80 of 31 October 1980 (OJ L 291, 31. 10. 1980, p. 1) was due to expire on 30 June 1981. Estel's production programme for the third quarter of 1981 probably had to be drawn up, in regard to exports to North America, in the light of the fact that the existing quota system was coming to an end and before Estel knew what its obligations would be under any future quota system.

Nonetheless, balancing these arguments, I would not for my part regard the facts relied on as sufficiently exceptional to justify departure from the normal level of fine, even though a different result was arrived at by a majority in the Eurofer arbitration proceedings, The application of the scheme is intended to be strict in the interests of the industry as a whole, and I am not satisfied by Estel, on whom the burden clearly lies, that having committed itself to the North American contracts, it took all the necessary steps to keep within the quota in respect of its later contracts. To condone this part of the excess would seem to me neither to be justified nor fair to other producers.

Finally, reliance is placed on the fact that Estel formed a view as to the appropriate method of calculating how the adjustment under Article 10 should be made, which it genuinely thought was correct, and which, if not, was at the least tenable for the reasons set out in correspondence and in the pleadings. The Commission in fact applied Article 6 of the Decision by analogy when making the adjustments under Article 10: in 1982 Estel accepted the Commission's method of making adjustments, and I am prepared to assume, since it is not necessary to decide the point, that the Commission's approach is the correct one, or at any rate one which it is entitled to adopt. Nonetheless it does not seem to me that it can be said that the view taken by Estel was specious or unarguable. On the contrary, I think it was clearly arguable, in view of the need to produce proof that steel produced was actually used for specified purposes. The fact is that Article 10 does not indicate how the adjustments are to be made, and, even if to the Commission's experts it may be obvious that Article 6 had to be applied by analogy, that does not appear obvious on the face of the Decision.

According to a letter from Eurofer of 12 November 1981, it was given an oral explanation of the Commission's methods of applying Article 10 and immediately informed its members by telex on 2 November. It seems to be agreed that formal, written confirmation of its method was given by the Commission in a letter of 10 November. The third quarter had, of course, expired at the end of September. Counsel for the Commission has said that it was for undertakings who wished to take advantage of Article 10 to ask the Commission how it was going to make the adjustments; when asked by some undertakings in the course of the third quarter, the Commission did give an explanation. However this may be, it seems quite possible that Eurofer (and, therefore its members) did at an early stage think that the Commission would apply Article 10 in a way consistent with the approach adopted by Estel, and only made enquiries after the third quarter was over because its understanding of the Decision was put in doubt.

It would have been more prudent if Eurofer and Estel had sought written confirmation earlier than they did. Even so, I do not think that the position is entirely satisfactory. It would have been a simple matter to include in the text of Article 10 an indication of the basis on which any adjustment would be made; in the absence of such an indication it would have been good administrative practice to have informed undertakings in advance how Article 10 was to be applied. Though the question is not entirely easy, I do not think that it is just to hold Estel entirely to blame for what happened when it comes to imposing a fine. As a result, in my opinion, the circumstances relied on justify reducing the fine to some extent. In my view it would be appropriate to reduce the fine by 25 ECU in respect of each of the 10548 tonnes. That would reduce the fine by 263700 ECU to a total of 3391890 ECU.

For these reasons, it is my opinion that the claim for the annulment of the Decision of 13 August 1982 should be rejected but that the amount of the fine should be reduced. In the circumstances, it would be appropriate to reduce the fine to 3391890 ECU. Rather than apportion the costs, it seems to be just that each side should bear its own costs of the proceedings.