Opinion of Mr Advocate General

Mr President,

Members of the Court,

Introductory observations

The case on which I give my opinion today concerns once again the steel quota svsiem introduced by Decision No 2794/80 of 31 October 1980 (Official Journal L 291 of 31 October 1980, p. 1). Since the Court is familiar with the quota system from a number of other cases and the main points of the system are set out in the report for the hearing I need not examine it further.

Under the system the applicant in these proceedings, a German steel undertaking, received an notification from the Commission dated 6 April 1981, pursuant to Article 3 of Decision No 2794/80 (see Annex 1 to the application). In the notification particulars were given of the relevant reference production figures for the second quarter of 1981 and of the production quotas resulting from the application of the abatement rates prescribed, by Decision No 664/81 of 13 March 1981 (Official Journal L 69 of 14 March 1981, p. 22) and relating to that quarter. As to the reference production figures the notification simply stated that they had been adjusted in accordance with Article 4 of Decision No 2794/80. It subsequently became clear in the proceedings that the reference production figures were adjusted pursuant to Article 4 (3), that is to say by taking account on the one hand of the average rate of utilization of the applicant's hot wide-strip mill No 2 at Bremen in the period from July 1977 to June 1980 and on the other hand the average rate of utilization of the same facilities of the other undertakings in the Communitv during the years 1977, 1978 and 1979. The basis taken for the figures, and I shall go into this in detail later, was the maximum possible production which in a questionnaire covering 19SC the applicant had stated to be 4260000 tonnes (whereas the figure given for the maximum possible production in questionnaires covering previous years was only 3770000 tonnes).

That decision prompted the applicant to institute proceedings before the Court on 15 May 1981. In its application it asks the Court to declare void the decision contained in the Commission's letter of 6 April 1981, in so far as it fixes the applicant's reference production figures and production quota for the rolled steel products in Group I (within the meaning of Article 2 of Decision No 2794/80).

The grounds for its application are that the Commission failed to observe the principle of uniform employment, failed to take the action required by the prohibition of subsidies contained in Article 4 (c) of the ECSC Treaty and that Decision No 2794/80 did not receive the assent of the Council. The first ground of application was framed more precisely in the reply inasmuch as it is there claimed that the Commission failed to observe the principle of uniform minimum employment. In addition the applicant raised two further complaints in the reply (which naturally raises questions of admissibility): it contends that delivery quotas were fixed for the common market and exports and that this was not permissible.

In my view the legal dispute described above calls for the following comments.

I — Breach of the. alleged requirement of uniform minimum employment

Quite apan from the question whether a requirement of uniform minimum employment can be deduced from the ECSC Treaty, a number of different aspects should be distinguished. The applicant's complaint is directed on the one hand against Decision No 2794/80 and on the other hand against the way in which Article 4 (3) of Decision No 2794/80 was applied to the applicant's case. An appropriate distinction must be accordingly drawn when this complaint is considered from the legal point of view.

As for the contention that the requirement of minimum uniform employment has general validity as far as the application of Article 58 is concerned, I will merely say at this stage that in my opinion such a requirement cannot at any rate be deduced simply from the provisions concerning a compensation fund, as is contended in the application. In Decision No 2794/80 no use was in fact made of this possibility, mentioned in Article 58 (2), of maintaining employment in particularly badly affected undertakings and in these circumstances I consider that only the narrower obligation to safeguard continuity of employment contained in Article 2 applies in this regard. Even if considered together with the general legal principle of equal treatment no requirement of uniform minimum employment can be deduced from the obligation contained in Article 2 for according to the wording of Article 58 the Community must also take account of the aims of economic polio., mentioned in Article 2, of ensuring the most rational distribution of production at the highest possible level of productivity. Those aims of economic policy may perfectly well exclude the maintenance of uniform minimum employment in the steel undertakings of the Community.

1. Criticism of the structure and content of Decision No 2794/80

2. The allegedly incorrect application of Article 4 (3) of Decision No 2794/80 to the applicant's case

II — Failure to take into account breaches of the prohibition of subsidies contained in Article 4 (c) of the ECSC Treaty

In its second ground of application the applicant points out that for many years and, to judge from reports in the press, especially since 1975, considerable sums from public funds have been allocated to national steel industries in a number of Member States (namely Belgium, France, Italy and the United Kingdom) and this has not only led to a distortion of the conditions of competition but has also artificially preserved and increased production capacity (which did in fan increase by about 10% from 1974 to 1976). It contends that contrary to its duty, defined in Article 8 of the ECSC Treaty, the Commission took no action against this flagrant breach of the principle contained in Article 2 of the Treaty and of the prohibition of subsidies the vital importance of which has been repeatedly stressed in case-law of the Court and that it is also now doubtless no longer possible to undo what has happened. In view of the fact that by virtue of this, the conditions of production were improperly influenced during the reference period which is relevant for Decision No 2794/80, it cannot be considered justifiable to base the quota system simply on actual production in those years. It would have been more equitable, the applicant argues, to take account of these matters in the assessment of quotas as a kind of compensation for damage and either reduce the quotas of undertakings receiving aids, which would have produced less without them, or grant a quota increase to undertakings which had not received subsidies.

The Commission does not deny that since the beginning of the steel crisis considerable aid has been given to the steel industry in some Member States. Nevertheless the Commission questions the details provided by the applicant on the extent of the aid provided. Secondly it contends that the aids in question were not all granted specifically to the steel industry and were not all covered by Article 4 (c) but partly took the form of general measures in the sphere of economic, industrial, regional, fiscal and social policy as well as the promotion of research (adopted, incidentally, also in the Federal Republic of Germany) which are not prohibited under the Treaty but come instead under Article 67 which merely lays down a procedure for eliminating the effects which they have on the steel industry. Thirdly, and above all, the Commission maintains that, even in so far as the aids in question were not compatible with Article 4 (c), in the absence of express authority under Article 58 it did not have the power to incorporate compensatory provisions in the quota system (which would have meant, first, acceptance and approval of the subsidies and secondly, with reference to the applicant's argument that some form of compensation for damage ought to have been introduced, the penalization of the undertakings receiving the subsidies instead of the Member States responsible for providing them). According to the Commission it may properly deal with such infringements of the Treaty only in proceedings under Article 88 which also provides special guarantees for the Member States concerned.

As far as this issue is concerned, it is quite understandable that non-subsidized undertakings like the applicant are severely critical of the Commission's conduct and the form which the quota system took. It is quite clear that the quota system, which is primarily based on actuai production in the past, would have produced different results if in the past the Commission had put an end to prohibited subsidies, thus preventing unviable undertakings from being artificially kept alive in whole or in part or production from being increased, which would not have been possible without subsidies.

It also strikes me that the Commission goes too far in arguing that subsidies granted in breach of the ECSC Treaty can only be the subject of proceedings instituted under Article 88 of that Treaty (which deals with the recording and remedying. of a failure to fulfil an obligation under the Treaty) whilst outside that context they cannot constitute a material circumstance. After all, Article 58 does provide that the principles set out in Anieles 2, 3 and 4 should be taken into account and indeed no distinction is made as to whom those provisions are primarily addressed. Article 54 of the ECSC Treaty, dealing with the Commission's opinion on investment programmes, must also be borne in mind. The fifth paragraph of that article expressly provides that where the financing of a programme or the operations of the installations planned therein would involve subsidies, aids and the like an adverse opinion delivered by the Commission on those grounds is to have the force of a decision within the meaning of Article 14 and the effect of prohibiting the undertaking concerned from drawing on resources other than its own funds to carry out the programme to which objection is taken. At the veryleast this means that where aids are concerned, and at all events before the aids are granted, the Commission can take some action against undertakings without staning proceedings under Article 88. Funhermore it is cenainly not inconceivable that the grant of subsidies might be an important factor as regards Decision No 2794/83 itself, for example in the application of Article 4 (4) or, in some circumstances, in the application of Article 14.

Finally, I see no reason for suggesting that on the question whether previous subsidies should be taken into account the Coun should depan from its decision in Case 14/81 in which it was held with regard to a similar, though less elaborate, argument that Article 58 is not designed to compensate for distortions of competition attributable to subsidies, for which the Commission has other means of action at its disposal (paragraph 23). However, it seems to me that in view of the Commission's arguments on this matter, which, as I have said, go too far, that paragraph of the Court's judgment should be clarified and expanded.

Since the Commission has, as I have said, a considerable margin of discretion in elaborating the quota system, the crucial question in this context, too, is, as it was in Case 14/81, whether the failure to take account of subsidies in the reference period must be viewed as a misuse of powers. For various reasons that question can hardly be answered in the affirmative. As a general proposition it may be said that, although Article 58 of the ECSC Treaty does require the Commission to have regard to the prohibition of subsidies contained in Article 4 when it fixes quotas, it does not stipulate how this is to be done.

In this regard it must first be remembered that the Commission has alreadv attempted in Decision No 257/80 of 1 February 1980 (Official Journal L 29 of 6. 2. 1980, p. 5) to tackle the problem of specific aids to the iron and steel industry and that these efforts were continued on a wider basis in Decision No 2320/81 of 7 August 1981 (Official Journal L 228 of 13. 8. 1981, p. 14). It certainly ought not to be forgotten thar those rules, which, so faras they apply, rule out an infringement of Article 4, do not remedy what has happened in the past (because, as results from Article 1 of the decisions, they only apply to aids granted after their entry into force and previous subsidies are required to be taken into account only in accordance with Article 2 of Decision No 2320/81 in the examination of new plans for aids).

However, it seems extremely questionable whether the Commission, either in a decision or when applying Article 88 of the Treaty or calculating reference production in the past, may still reconsider circumstances dating back a number of years in order to neutralize payments made at that time or their effects on reference production. Any such application of the obligation contained in Article 58 to have regard to the prohibition of aids would not only encounter legal objections but would be opposed by considerations of practicability. In fact it is difficult to see how that duty could reasonably have been fulfilled without carrying out protracted inquiries under the quota system which had to be worked out and put into practice very quickly. In particular there would be the problem of calculating any allowances and decreases according to the subsidies granted and their effects on the conditions of production. It is also not difficult to see that any attempt to achieve a solution (even by using estimates as in the law of damages, to which the applicant referred) would have produced protracted and extensive disputes making the quota system, which is capable of functioning only if clear conditions of production are provided, for the most pan impracticable. Given that situation.

it would scarely be proper to impose on recipients of subsidies, which have acquired certain legal rights, commensurate penalties in the form of a reduction in their quota accorded under the quota system.

In my view, therefore, the fact that the Commission generally disregarded the question of unlawful aids granted in the past cannot be regarded as a defect of the quota system which would be a ground for declaring void the contested notification.

A different question, however, is how far the question, upon which I have already touched, of the subsidizing of competitors may be taken into account in the context of, for example. Article 4 (4) or Article 14 of Decision No 2794/80. Although no submission to that effect has been made in this case I think that it would be appropriate, in view of the clear contradiction between the obligation in Article 58 to take account, when fixing quotas, of Article 4 of the ECSC Treaty and the Commission's argument that in that regard the prohibition of aids cannot be taken into consideration at all, for the Court to make some mention of that obligation in its judgment. As I have said, in the context of Decision No 2794/80/ECSC that obligation could be taken into account both in the application of Article 4 (4) and, in certain circumstances, in the application of Article 14. To my mind it would be quite possible to contemplate a future provision, modelled on the fifth paragraph of Article 54 of the ECSC Treaty, to the effect that, for example, no quota may be allocated for production which has arisen or been maintained in contravention of Decision No 2320/81 of 7 August 1981 (Official Journal L 228 of 13. 8. 1981). Just as Article 54 gives the Commission the power, if not the duty, to deliver an adverse opinion on an investment programme if prohibited aids are used, it may be said that the duty in Article 58 (2) to take account, when fixing quotas, of the prohibition of aids at least entitles the Commission to refuse quotas where such aids are used.

III — Lack of the Council of Ministers' assent to Decision No 2794/80

IV — Unlawful fixing of delivery quotas for the common market and unlawful restriction of production intended for export

Finally I come to a last series of complaints which, as I said at the beginning, were raised for the first time in the replv. One of them relates to Article 7 (2) of Decision No 2794/80 which reads:

With regard to the delivery of products subject to the quota system, undertakings may not exceed, by group of products, for deliveries within the common market, the ratio of Community deliveries to total deliveries in those 12 months of the period from July 1977 to June 1980 in which the total production of the four groups of rolled products was the highest.

The applicant sees in this provision the fixing of delivery quotas which was not within the Commission's powers under Article 58. The other complaint is to the effect that the quota scheme improperly relates to that part of production which is intended for expon. It contends that exports were thereby restricted, in other words expon delivery quotas were fixed because as regards this channel of disposal, apan from stocks and bought-in steel, only that pan of (restricted) production which had not been marketed in the Community could be exponed. In this respect, too, the applicant considers that the Commission lacked the requisite powers; what it ought to have done was restrict production according to home demand and leave products intended for expon out of the scheme.

1. As I have already indicated, these arguments give rise in the first place to a number of questions of admissibility.

2. If that is accepted, u in any event becomes ver. quicklv apparent that this complaint, too, cannot help the application to succeed.

3. It is therefore clear the new submission which the applicant makes in the reply is also incapable of assisting its case.

V — Conclusion

It only remains for me to sum up. In my opinion the application lodged by Klöckner must be dismissed as unfounded and accordingly the applicant must be ordered to pay the costs.

1 Translated from the German.

2 Alpha Steel Limited v Commission, judgment of 3 March 1982 [1982] ECR 749

3 SpA Metallurgica Rumi v Commission, judgment of 16 February 1982 [1982] ECR 487.

4 Halyvourgiki Inc. and Helleniki Halyvourgia SA, judgment of 16 February 1982 [1982] ECR 593

5 Lemmeni- Werke GmbH v High Authority of the ECSC judgment of 13 July 1965 [1965] ECR 677 at p. 669

6 Krupp Stahl AC v Commission, judgment of 28 October 1981 [1981] ECR 2489; SpA Metaliurgica Rumi v Commission, judgment of 16 February 1982 [1982] ECR 487

7 Société des Charbonnages de Beeringen and Others v High Authority, judgment of 29 November 1956 [1954 to 1956] ECR 311 at p. 326.

8 I. Nold KG, Kohlen- und Baustoffgroßhandlung High Authoriy, judgment of 20 March 1959 [1959] ECR 41 at p. 51.

9 Compagnie des Hauts Fourneaux et Fonderies de Givors and Others v High Authority judgment of 10 May 1960 [1960] ECR 241 at p. 256.

10 Société Fives Lille Cail and Others v High Authority judgment of 15 Decembre 1961, [1961] ECR 281 at p. 295.

11 Klöckner Werke AG and Hoesch AG v High Authority, judgment of 13 July 1962 [1962] ECR 325 at p. 347.

12 Hans-Otto Wagner GmbH Agrarhandel KG v Commission, judgment of 12 December 1979 ; [1979] ECR 3657 at p. 3678

13 Governement of the Italien Republic v High Authority, judgment of 21 December 1954 [1954 to 1956] ECR 37 at p. 51

14 Compagnie des Hauts Fourneaux de Chasse v High Authority, judgment of 13 June 1958 [1957 and 1958] ECR 199 at p. 226

15 Louis Worms v High Authority judgment of 12 July 1962, [1962] ECR 199 at p. 226

16 Anton Durbeck v Commission, judgment of 1 April 1982 [1982] ECR 1251.

17 Geitling v High Authority, judgment of 20 March 1957 [1957] ECR 3 at p. 17.

18 Governement of the Federal Republic of Germany v High Authority, judgment of 10 May 1960 [1960] ECR 225 at p. 239.

19 Ferriera Padana SpA v Commission, judgment of 16 February 1982 [1982] ECR 517.