Judgment of the Court (Fifth Chamber) 15 January 1985
In Case 250/83
THE COURT (Fifth Chamber) composed of: O. Due, President of Chamber, C. Kakouris, U. Everling, Y. Galmot and R. Joliét, Judges, Advocate General: C. O. Lenz Registrar: H. A. Rühi, Principal Administrator
gives the following
JUDGMENT
Facts and Issues
1. The relevant regulations
2. Facts and procedures
3. Conclusions of the parties
4. Submissions and arguments of the parties
Admissibility
Substance
4.1. Alleged unlawfulness of Decision No 2748/83 for misuse of powers by discriminating against the applicant
4.2. Unlawfidness of Decision No 2748/83
4.2.1. Alleged infringement of Article 18 of Decision No 2177/83
4.2.2. Alleged breach of essential procedural requirements (Article 33 of the Treaty) and failure to state reasons (Article 15 of the Treaty)
4.2.3. Alleged infringement of Decision No 2320/81
4.2.4. Alleged breach of the principle of equal treatment laid down in Article 4 (b) of the Treaty
5. Oral Procedure
Decision
The alleged discrimination with regard to the applicant
Alleged infringement of Article 18 of Decision No 2177/83
Alleged infringement of Decision No 2320/81
Costs
1. The relevant regulations
1.1. On 1 February 1980 the Commission adopted a general decision, Decision No 257/80 establishing Community rules for specific aids to the steel industry (Official Journal L 29, p. 5), whereby a system of notification and approval of specific aids to the steel industry was introduced with a view to ensuring that such aid was directed to well-defined aims and in particular contributed to the restructuring of the sector, that its duration and extent was restricted and that it would not cause unacceptable distortion to competition.
1.2. When a period of manifest crisis within the meaning of Article 58 of the ECSC Treaty arose, the Commission introduced by means of Decision No 2794/80 of 31 October 1980 (Official Journal L 291, p. 1) a system of production quotas for the Community iron and steel industry. The system so established was extended on several occasions, inter alia by Commission Decision No 2177/83 of 28 July 1983 on the extension (up to 31 January 1984) of the system of monitoring and production quotas for certain products of undertakings in the steel industry (Official Journal L 208, p. 1).
2. Facts and procedures
3. Conclusions of the parties
(a). Declare void the part of the contested decision referred to in the application;
(b). Adopt any further measure, in the light of inter alia Article 34 of the ECSC Treaty, which it considers necessary; and
(c). Order the Commission to pay the costs.
4. Submissions and arguments of the parties
(1). The decision is vitiated by misuse of powers because it discriminates against the applicant;
(2). It is illegal because it:
4.1. Alleged unlawfulness of Decision No 2748/83 for misuse of powers by discriminating against the applicant
4.2. Unlawfidness of Decision No 2748/83
4.2.1. Alleged infringement of Article 18 of Decision No 2177/83
(a). The applicant submits tht the contested decision is based in particular on Article 18 of Decision No 2177/83. Inter alia, the Commission stated that the wording of the first indent of the first paragraph of Article 14 rendered ineligible a number of undertakings experiencing exceptional difficulties, and concluded that what had occurred was unforeseeable.
(b). The Commission states that in the days following publication of Decision No 2177/83 it received numerous requests for adjustment of quotas from small and medium-sized undertakings which alleged that they were experiencing exceptional economic difficulties as a result of the quota system and the worsening of the crisis in the iron and steel market. On examining the situation of those undertakings the Commission found that since they had received aid, often of a modest or even derisory amount, for purposes other than to cover operating losses, they could not obtain an adjustment of their quotas, as they could have under the previous system. Only then did the Commission appreciate that the effect of the restrictions introduced by Decision No 2177/83 was to exclude from entitlement to adjustment of quotas undertakings which merited it, which were facing exceptional difficulties and which had obtained additional quotas in the past. Consequently, the Commission endeavoured to remedy the situation by adopting Decision No 2748/83.
4.2.2. Alleged breach of essential procedural requirements (Article 33 of the Treaty) and failure to state reasons (Article 15 of the Treaty)
(a). The applicant states that according to Article 15 of the Treaty all measures of the Commission must state the reasons on which they are based. Moreover, since Article 18 of Decision No 2177/83 is of an exceptional nature it requires a very precise statement of reasons. The Commission ought to have stated clearly what were the unforeseen difficulties in the application of Decision No 2177/83.
(b). The Commission considers that the complaint of failure to state reasons is without foundation since the preamble to Decision No 2748/83 was sufficiently clear to allow the objectives pursued by the Commission to be understood. The Commission relies on the case-law of the Court, especially the judgment of 3 March 1982 in Case 14/81 (Alpha Steel v Commission [1982] ECR 749).
4.2.3. Alleged infringement of Decision No 2320/81
(a). The applicant considers that although Decision No 2748/83 is apparently intended to govern production quotas it in fact seeks to establish an unacceptable hierarchy between the various kinds of aid. No such hierarchy is provided for in Decision No 2320/81, which treats all the aid referred to there, once authorized by the Commission and consequently considered compatible with the ECSC Treaty, as having the same value. Moreover, the Court in its judgment of 7 July 1982 in Case 119/81 (Klöckner-Werke v Commission [1982] ECR 2627) excluded any necessary link between aid and the fixing of quotas.
(b). The Commission states that the seriousness of the crisis affecting the steel market forced it to accept that aid was essential to overcome the enormous difficulties confronting all undertakings in the Community. However, to prevent aid, which was unfortunately indispensable, from being granted without coordination and involving greater distortion to competition than was strictly unavoidable, the Commission adopted Decisions Nos 257/80 and 2320/81 establishing Community rules for aids to the steel industry. In the latter decision the Commission stated clearly, especially in Section 2 of the preamble, that it did not put all aid in the same category. It is easy to infer from the wording of the decision that apart from emergency aid, the kind of aid which is regarded as most likely to damage competition is aid to facilitate continued operation, the frequency and amount of which must be limited to what is strictly necessary.
4.2.4. Alleged breach of the principle of equal treatment laid down in Article 4 (b) of the Treaty
(a). The applicant maintains that the Commission is guilty of a serious breach of the principle of equal treatment, which is the foundation of the iron and steel Community, by knowingly permitting undertakings in the Federal Republic of Germany alone to avail themselves of Decision No 2748/83, thereby causing serious damage to the applicant, which is obviously discriminated against in relation to those undertakings.
(b). The Commission considers that the applicant's submission is as serious as it is gratuitous. The Commission repeats what it previously said in relation to the alleged discrimination between undertakings referred to by the applicant. It maintains further that the new Article 14 introduced by Decision No 2748/83 allows the grant of aid for modernization to a good many small and medium-sized undertakings, especially Italian, to the exclusion of the larger undertakings in all the Member States.
5. Oral Procedure
1. By an application received at the Court Registry on 10 November 1983 the Società finanziaria siderurgica per azioni (Finsider), of Rome, brought an action under the second paragraph of Article 33 of the ECSC Treaty for a declaration that a general decision of the Commission, Decision No 2748/83 of 30 September 1983 amending for the second time Decision No 2177/.83/ECSC on the extension of the system of monitoring and production quotas for certain products of undertakings in the steel industry, is void (Official Journal L 269, p. 55).
2. During the proceedings the applicant defined the purpose of the action. It seeks a declaration that the contested decision is void in so far as it prevents an undertaking in respect of which the quota system caused exceptional difficulties from benefiting from an adjustment of its quotas pursuant to Article 14 of the aforesaid Decision No 2177/83 when within the twelve months prior to the quarter in question it received national aid authorized by the Commission to cover its operating losses. That amendment of Article 14 excludes the grant of additional quotas even if the losses result from the fact that the undertaking was endeavouring to follow the Commission's industrial policy.
3. The applicant puts forward a number of submissions in support of its action. In substance it maintains that Decision No 2748/83 is unlawful by reason of:
4. With regard to those submissions it must be borne in mind, first, that the action has been brought against a general decision under the second paragraph of Article 33 of the ECSC Treaty, according to which undertakings may institute proceedings against general decisions which they consider involve a misuse of powers affecting them. In consequence the submission of breach of essential procedural requirements may be dismissed straightaway since such a submission is obviously alien to the concept of misuse of powers. As for the other submissions, their substance must be considered before it may be determined whether or not they concern the concept of misuse of powers.
5. The applicant states that Article 14 of Decision No 2177/83 in its original version established an objective criterion for entitlement to additional quotas, namely its restriction to undertakings which had not already received national aid other than aid for closure and that criterion did not cause unreasonable discrimination between the undertakings. By making it possible for undertakings which had received other forms of national aid with the exception of that intended to cover operating losses to obtain additional quotas, Decision No 2748/83 introduced discrimination against undertakings which received the latter kind of aid and thus restricted their ability and productive capacity in relation to all other competing undertakings. Such discrimination is said to be based on an arbitrary, formal and nominal criterion which excludes in advance any analysis of the true reasons for the grant of the aid in question.
6. Moreover, Decision No 2748/83 tends to exclude the possibility of additional quotas for undertakings which have the worst operating results and whose needs are thus the most urgent. The effect of the decision would thus be entirely the opposite of the objective sought in giving the Commission power to draw up a scheme of additional quotas for undertakings for which the system of quotas had created exceptional difficulties. In those circumstances the applicant concludes that the discrimination is not only contrary to Article 4 (b) of the Treaty but also represents a misuse of powers in its case.
7. The Commission contends that when the steel market crisis became worse, and in particular when unforeseen difficulties in the application of Decision No 2177/83 arose, it became necessary pursuant to Article 18 of Decision No 2177/83 to amend Article 14 thereof to make it possible to grant additional quotas to undertakings which had received aid other than that intended for closure while still excluding undertakings which had received aid to cover operating losses. The latter kind of aid produced the most damaging effect on competition and is the farthest from the true objective pursued by the Commission, namely to restructure undertakings. In introducing a new criterion which was objective and general and thus not discriminatory vis-à-vis the applicant, the Commission was merely exercising its discretion for the purpose of an equitable management of the quota system.
8. As the Court has said, inter alia in its judgment of 13 July 1962 in Joined Cases 17 and 20/61 Klöckner-Werke v High Authority ([1962] ECR 325), for the Commission to be accused of discrimination, it must be shown to have treated like cases differently, thereby subjecting some to disadvantages as opposed to others, without such differentiation being justified by the existence of substantial objective differences. In order to determine whether the different treatment of which the applicant accuses the Commission may constitute a misuse of powers in its case, it is therefore necessary in the first place to consider whether the treatment is based on the existence of objective and substantial differences having regard to the aims which the Commission may lawfully pursue as part of its industrial policy in the European steel industry.
9. It appears from the preambles to both Commission Decision No 2320/81 of 7 August 1981 establishing Community rules for aids to the steel industry (Official Journal L 228, p. 14) and the aforesaid Decision No 2177/83 extending the quota system that the rules pursue a common aim, namely to promote the restructuring needed to adapt production and capacity to foreseeable demand and to reestablish the competivity of the European steel industry. It is consistent with that aim that undertakings which have received a form of aid likely to delay the desired restructuring, namely aid intended to cover operating losses, should be excluded from the benefit of the additional quotas, the grant of which may likewise reduce their willingness to restructure. Moreover, the Commission cannot be reproached for imposing a precise and objective criterion leaving no room for consideration of the special circumstances which have led in each case to the operating losses covered by the national aid in question.
10. On the contrary, to have enabled undertakings which during the previous twelve months have received other kinds of national aid authorized by the Commission to obtain additional quotas does not constitute a misuse of power with regard to the applicant. Those other kinds of aid (investment aid, aid for closure or research and development) are in fact likely to encourage restructuring and improvement of competitivity. The distinction made by the contested decision between such aid and aid intended to cover operating losses is thus based on an objective and substantial criterion with regard to the aims which the Commission may lawfully pursue as part of its industrial policy.
11. It follows that the first submission must be rejected.
12. The applicant states that Decision No 2748/83 is based on Article 18 of Decision No 2177/83 which authorizes the Commission, if the application of Decision No 2177/83 encounters any unforeseen difficulties, to carry out the necessary adjustments by general decision. The Commission had been making individual decisions in relation to aid by the Member States to their respective steel undertakings as early as 29 January 1983. Before adopting Decision No 2177/83 it thus had full knowledge of the various kinds of aid which the States intended to grant and thus was in a position to foresee the number of undertakings which could not benefit from the adjustments provided for in Article 14 as originally drafted. Consequently, the difficulties cited by the Commission to justify the adoption of Decision No 2748/83 were not unforeseen and the decision was accordingly illegal for infringement of Article 18 of Decision No 2177/83.
13. The Commission, on the other hand, maintains that as soon as Decision No 2177/83 was adopted numerous applications for an adjustment of quotas were made to it by small and medium-size undertakings which alleged that they had excepţional financial difficulties as a result of the quota system and the intensification of the crisis. On considering the situation of those undertakings the Commission found that since they had received aid, often modest and for purposes other than to cover operating losses, they could no longer obtain an adjustment of their quotas. It was only then that the Commission became aware that the effect of Article 14 of Decision No 2177/83 was to exclude from the benefit of adjustment some undertakings which deserved it. In the circumstances the Commission concluded that the application of the said provision had in fact encountered unforeseen difficulties and that it was perfectly entitled to remedy the situation by adopting Decision No 2748/83 pursuant to Article 18 of Decision No 2177/83.
14. For the purpose of resolving this problem it must first of all be emphasized that the purpose of the amendment to Article 14 of Decision No 2177/83 is within the limits of the adjustments authorized by Article 18 thereof. The submission made by the applicants concerns only the actual circumstance which justifies the authorization, namely that the difficulties encountered were in fact unforeseen. Even if the Commission ought to have foreseen the difficulties in question when adopting Decision No 2177/83, its failure to do so cannot amount to a misuse of powers. It follows that the submission must be dismissed.
15. The applicant maintains that although the aim of Decision No 2748/83 is apparently to regulate production quotas, in fact it seeks to establish a hierarchy between the various kinds of aid which was certainly not contemplated by Decision No 2320/81. The real aim of Decision No 2748/83 is thus to amend the rules on aid and that amounts to a misuse of powers vis-à-vis the applicant.
16. That argument is obviously unfounded. In the first paragraph of Section II of the preamble to Decision No 2320/81 the Commission stated that it was appropriate to differentiate between various forms of aid, with a view to placing stricter time constraints on those which were likely to have more damaging effects on competition and to be less effective in promoting restructuring. In application of that principle Article 5 of the decision subjects the authorization of aid for continued operation to particularly strict conditions by comparison with those provided for other forms of aid, apart from emergency aid which could not be authorized after 31 December 1981. It is quite consistent with the assessment by the Commission of the various forms of aid that by means of the contested decision it introduced into the quota system a distinction between aid intended to cover operating losses and other forms of aid authorized by it.
17. In the circumstances it must be held that the applicant has not succeeded in showing that Decision No 2748/83 is vitiated by misuse of powers vis-à-vis the applicant. Consequently the action must be dismissed in its entirety.
18. Under Article 69 (2) of the Rules of Procedure the unsuccessful party is to be ordered to pay the costs. As the applicant has failed in its submissions it must be ordered to pay the costs.
On those grounds, THE COURT (Fifth Chamber) hereby:
1 Dismisses the application.
2 Orders the applicant to pay the costs.
1 Language of the Case: Italian.