JUDGMENT OF 17. 7. 1959 — CASE 42/58 SAFE v HIGH AUTHORITY

In Case 42/58

THE COURT composed of: A. M. Donner, President, 0. Riese (Rapporteur) and J. Rueff, Presidents of Chambers, L. Delvaux, Ch. L. Hammes, R. Rossi and N. Catalano, Judges, Advocate-General: M. Lagrange Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Conclusions of the parties

II — Facts

III — Submissions and arguments of the parties

1. Admissibility

A — Was the application against the letter of 31 July 1958 from the Market Division of the High Authority lodged within due time?

B — Does the letter of 31 July 1958 constitute a decision?

2. Substance

A — The action for failure to act

B — The application for annulment and the objections of illegality

(a) Lack of competence

(b) Failure to state reasons

(c) Infringement of the Treaty and misuse of powers

Grounds of judgment

Admissibility

1. Was the application against the letter from the Market Division of the High Authority of 31 July 1958 lodged within the prescribed period?

2. Is the action for failure to act admissible?

Substance

1. Can the applicant raise an objection of illegality against the letters of the High Authority of 18 December 1957 and 17 April 1958?

(a) Does the letter of 18 December 1957 constitute a decision?

(b) Does the letter of 17 April 1958 constitute a decision?

2. May the Court examine the legality of the principles set out in the letters of 18 December 1957 and 17 April 1958?

3. Is it legal to subject group ferrous scrap to equalization?

4. The arguments based on the exemptions already granted.

Costs

I —. Conclusions of the parties

1. The implied decision of refusal resulting from the absence of a reply for more than two months to the request for exemption addressed to the High Authority of the ECSC by letter of 23 July 1958;

2. In so far as necessary, the decision to postpone taking a decision resulting from the letter of 31 July 1958 addressed to the applicant undertaking by the High Authority;

3. On the ground that it is illegal, the general decision constituted by the letter of 18 December 1957 addressed by the High Authority to the Office Commun des Consommateurs de Ferraille (OCCF) (Joint Bureau of Ferrous Scrap Consumers) on the definition of the concept of ferrous scrap from own resources for the purposes of Decisions Nos 22/54, 14/55 and 2/57;

1. …

2. As regards the alleged implied decision of refusal resulting from the absence of a reply from the High Authority to the letter of 23 July 1958, rule that the High Authority was not required to grant the exemption requested and did not commit a misuse of powers in not granting that exemption, and accordingly dismiss the application;

3. Dismiss the application brought against the letter of 31 July 1958 as inadmissible, since it does not constitute a decision against which an application may be brought;

4. In addition, reject the objection of illegality raised against the letter of 18 December 1957 and the claim for annulment, in so far as necessary, of the letter of 17 April 1958;

II —. Facts

1. In its steel-works at Hagondange (Moselle) the applicant manufactures fine steel, using in part ferrous scrap supplied by the Regie National des Usines Renault (National Network of Renault Factories) (hereinafter called Regie Renault) at Billancourt (Seine), which is also the principal user of the steel produced by the applicant.

2. The applicant, considering that the ferrous scrap received from the workshops of Regie Renault was not bought from a third party, but constituted own resources, did not declare it to the Caisse de Péréquation des Ferrailles Importees (CPFI) (Imported Ferrous Scrap Equalization Fund), which was informed thereof by its inspectors.

3. In its aforementioned letter of 18 December 1957, the High Authority, withdrawing its earlier reservations, had in addition approved two exemptions to the scheme resulting from its definition of own resources in favour of Breda Siderurgica S.p.A. of Sesto San Giovanni (Italy) and Koninklijke Nederlandse Hoogovens en Staalfabrieken NV of IJmuiden (the Netherlands). In a letter addressed to OCCF on 17 April 1958 and published in the Journal Officiel of 13 May 1958, p. 30 et seq., it explained that those exemptions had been granted because the works of the undertakings concerned are integrated locally with … works not belonging to them, in which the ferrous scrap is recovered. That local integration results from the fact that the works (in question) form … a single industrial group. However, it added: Although organic ties exist between the undertakings owning the works at Sesto San Giovanni and IJmuiden, the granting of the exemptions has been based exclusively on the criterion of local integration.

4. By letter of 23 July 1958 addressed to the High Authority, the applicant submitted a request for exemption in respect of the ferrous scrap which it received from Regie Renault. It received no answer other than a letter from the Director of the Market Division of the High Authority, dated 31 July 1958, stating that the said request was under study.

III —. Submissions and arguments of the parties

1. Admissibility

A —. Was the application against the letter of 31 July 1958 from the Market Division of the High Authority lodged within due time?

B —. Does the letter of 31 July 1958 constitute a decision?

2. Substance

A —. The action for failure to act

(a). It was not obliged to grant the exemption, because the applicant is not in the same situation as Breda and Hoogovens, since its works are not integrated locally with those of Regie Renault.

(b). The application does not contain any element calculated to show that the High Authority has committed a misuse of powers affecting the applicant. In fact, since the letter of 18 December 1957, the High Authority has not adopted a position on any request for exemption. Therefore the applicant has not been subjected to any special treatment. Moreover, until such time as the High Authority adopts a decision ordering the applicant to comply, the withholding of a decision on the request for exemption cannot prejudice the applicant.

B —. The application for annulment and the objections of illegality

(a). Lack of competence

(b). Failure to state reasons

(c). Infringement of the Treaty and misuse of powers

1. The application of the concept of bought ferrous scrap to the tonnages delivered by Regie Renault is erroneous. The truth is that there is no purchase and sale, but rather an exchange. In the relationships between the two undertakings, the purchase and sale prices are merely prices fixed for convenience. They can even be fixed arbitrarily and on a flat-rate basis at a given rate in no way connected with the real market rate.

2. The restrictive interpretation which the defendant gives to the concept of company name in its letter of 18 December 1957 is contrary to the aims of the Treaty which refers primarily to economic market concepts and does not intend to hamper industrial groups. The trend of modern law is towards an improved adaption of legal concepts to concrete realities. Where there is an economic integration such that, just as in the present case, the prices fixed between the members do not have any repercussion on the market prices, one has an economic phenomenon in the scientific sense of the term. The defendant has indeed realized that the criterion of the company name was too narrow, for in its letter of 17 April 1958 it abandoned that criterion in favour of the criterion of local integration. That decision does not involve a mere tidying up of the rule laid down in the letter of 18 December 1957, but it is an addition to it in that it takes industrial groups into account. However, it is vitiated by illegality because it is too limited.

3. The defendant is wrong in arguing that the reason why Regie Renault has kept the applicant with a distinct legal personality is that the interested parties expected certain advantages and should, conversely, bear the less favourable consequences. The decision to sever the applicant undertaking from Regie Renault was taken in order to obtain improved productivity. It would therefore be contrary to the purposes of the Treaty to oblige the interested parties to proceed to a merger.

1. The applicant and Regie Renault are two different legal persons. Therefore, movements of goods occurring between them require contracts which contain all the elements of a contract of purchase. They are made at a given price. If this were only a price of convenience the productivity of the applicant's factory could not be established on a realistic basis, although to do so was, as the applicant has itself admitted, one of the very reasons for its legal separation from Regie Renault.

2. The criteria suggested by the applicant, namely technico-economic integration and group ferrous scrap are much too vague. Furthermore, they are in contradiction with Article 2 of the decisions instituting the financial arrangements. According to those decisions the undertakings defined in Article 80 of the Treaty shall be subject to the contribution. The fact that the material returns to the point of departure cannot be decisive, for that would lead to unacceptable consequences. In particular, own arisings recovered by manufacturers and re-sold to the steel industry would be exempt from the levy, even in the absence of any integration between the undertakings concerned.

3. The applicant itself admits that Régie Renault, in granting legal autonomy to it, expected several advantages. It is natural that the contested party should also bear the disadvantages which, as regards the levy on ferrous scrap coming from Régie Renault, are of no great consequence.

1. Was the application against the letter from the Market Division of the High Authority of 31 July 1958 lodged within the prescribed period?

2. Is the action for failure to act admissible?

1. Can the applicant raise an objection of illegality against the letters of the High Authority of 18 December 1957 and 17 April 1958?

(a). Does the letter of 18 December 1957 constitute a decision?

(b). Does the letter of 17 April 1958 constitute a decision?

2. May the Court examine the legality of the principles set out in the letters of 18 December 1957 and 17 April 1958?

3. Is it legal to subject group ferrous scrap to equalization?

(a). Article 2 of Decision No 2/57 provides that undertakings of the kind described in Article 80 of the Treaty which consume ferrous scrap shall be assessable to payment of contributions under the equalization scheme.

(b). As appears from a reading of the letter of 18 December 1957, the High Authority interprets the concept of own resources as meaning that it is only scrap recovered by an undertaking in its own establishments bearing the same company name that is considered as own resources, whereas scrap supplied by a works run under another company name is considered as bought scrap, even in the case where close financial or administrative links exist between the supplier and the user.

(c). However, it is necessary to examine whether the assessing of group scrap to the levy—and the exemption for own arisings—is compatible with the purposes of the financial arrangement constituted by the equalization system.

(d). The reasoning set out above is confirmed by the concept of discrimination as it appears in particular from the second paragraph of Article 2 and Articles 3 (b), 60 and 67 of the Treaty.

(e). It would be manifestly contrary to the requirements of the Treaty if, as a result of an intervention on the part of the High Authority, the production costs of steel manufactured in whole or in part from ferrous scrap were to depend on the legal, administrative or financial structure of industrial groups.

(f). For all these reasons, although the exoneration of own arisings is compatible with the provisions of the Treaty, an exoneration for group scrap would bring about discrimination prohibited by Article 4 of the Treaty.

4. The arguments based on the exemptions already granted.

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties; Upon hearing the opinion of the Advocate-General; Having regard to Articles 2, 3, 4, 15, 33, 35, 53, 59, 60, 67 and 80 of the ECSC Treaty and Annex II thereto; Having regard to the Protocol on the Statute of the Court of Justice of the ECSC; Having regard to the Rules of Procedure of the Court of Justice of the ECSC, in particular Articles 60 and 85, THE COURT hereby:

1 Dismisses the application directed against the implied decision of refusal resulting from the absence of a reply for more than two months by the defendant to the applicant's letter of 23 July 1958 as unfounded;

2 Dismisses the application directed against the letter from the Market Division of the High Authority of 31 July 1958 as inadmissible.

3 Orders the applicant to bear the costs.