Report for the Hearing delivered in Case 103/85
I — Facts and written procedure
The applicant, Stahlwerke Peine-Salzgitter AG, is a German steel undertaking. Among other things, it produces rolled steel in Category III (heavy sections), which accounts for 16% of its total output. For that category of products the ratio between the production quota and the part of the quota which may be delivered in the common market (which is known as the I:P ratio) is exceptionally unfavourable for the applicant both in absolute terms and in comparison with other undertakings and causes it exceptional difficulties, since the delivery quota amounts to approximately 44% of its aggregate output whereas the average for other producers of heavy sections in the Community is approximately 68%. The difficulties arise because receipts from export sales are, generally speaking, lower than receipts from intra-Community trade. In view of the applicant's difficulties as a result of the I:P ratio and in response to its request, the Commission adjusted that part of the quota which may be delivered in the common market for the second, third and fourth quarters of 1984 pursuant to Article 14 of Commission Decision No 234/84/ECSC of 31 January 1984 on the extension of the system of monitoring and production quotas for certain products of undertakings in the steel industry (Official Journal 1984, L 29, p. 1). Article 14 provides as follows:
However, as regards the first quarter of 1985, the Commission let it be understood that it did not intend to grant the applicant quota adjustments pursuant to the aforesaid Article 14 on the ground that the authorities of the Federal Republic of Germany had granted it in the fourth quarter of 1984 aid for structural improvement in respect of special depreciation, which was authorized by the Commission. In the Commission's view, that aid for structural improvement constituted aid with a view to covering operating losses, which, under the said Article 14, preclude the grant of supplementary quotas pursuant to that article.
The legal basis for the grant of that aid by the German authorities was the directive of 28 December 1983 of the Federal Minister for Economic Affairs relating to the granting of aid for structural improvement to steel undertakings (Bundesanzeiger No 245 of 31 December 1983). The aid for structural improvement relates to:
expenditure in respect of employees affected by the restructuring measures and leaving the undertaking because they are directly or indirectly affected thereby;
the special depreciation of plant intended for steel production within the meaning of the ECSC Treaty, that is to say for the closure of such plant or, in exceptional cases, for long-term reduction in utilized capacity.
The applicant received DM 88.1 million for employees affected by restructuring measures and leaving the undertaking and DM 56.2 million for depreciation due to plant closures and to long-term reduction in utilized capacity. In the Commission's view, only the latter aid could qualify as aid with a view to covering operating losses within the meaning of the aforesaid Article 14.
On 15 January 1985 the applicant requested an additional quota pursuant to Article 14 of Decision No 234/84/ECSC. Subsequently, in view of the fact that the Commission did not take a decision on that request within the two-month period prescribed in Article 35 of the ECSC Treaty, the applicant brought this action for failure to act.
The application was registered at the Court on 22 April 1985.
On 11 June 1985 the Commission issued a decision refusing to apply Article 14 to the applicant in respect of the first and second quarters of 1985. In its reply the applicant extended the scope of its application to cover the Commission's formal decision and claims that that decision should be declared void.
Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided on 15 October 1986 to assign the case to the Second Chamber pursuant to Article 95 (1) and (2) of the Rules of Procedure. It also decided to open the oral procedure without any preparatory inquiry.
II — Conclusions of the parties
The applicant claims that the Court should:
In its reply the applicant extended the scope of its action to cover the Commission's formal decision of 11 June 1985 and, consequently, it claims that the Court should:
The Commission claims that the Court should:
III — Submissions and arguments of the parties
1. Preliminary remarks
Although it expresses doubts as to whether it is permissible to transform an action for failure to act into an action for a declaration that a decision is void, the Commission does not contest this formally. Furthermore, even though the decision of 11 June 1985 also relates to the second quarter of 1985, the parties have agreed that the Commission will decide on the requests for the adjustment of the quotas in respect of subsequent quarters by reference to the grounds of the judgment in the present proceedings, which will concern solely the first quarter of 1985.
The parties have limited themselves to two issues, namely: first, whether, as the Commission contends, Article 14 does not apply because the quota system has not created exceptional difficulties for the applicant since the first quarter of 1985 and, secondly, whether the aid received by the applicant must be regarded as aid with a view to covering operating losses within the meaning of Article 14 of Decision No 234/84/ECSC.
2. The question of exceptional difficulties
The applicant contests the Commission's assertion that it has been profitable since the fourth quarter of 1984. Although the applicant's results would show a profit if past losses were eliminated it is making losses with regard to the production of heavy sections as a result of the adverse I:P ratio. Consequently, if account is taken of the losses continuing to be borne by the applicant, the latter is still in deficit and showed a loss at the close of the 1984/85 financial year. Furthermore, the applicant contests the Commission's view that only an undertaking which makes losses during the quarter in question is eligible for a quota adjustment pursuant to Article 14. It contends that the existence of a deficit must not be regarded as an unwritten criterion for the application of Article 14 and points out that, in practice, the Commission has adjusted the quotas of non-loss-making undertakings under Article 14. The applicant refers to the judgment of the Court of 22 June 1983 in Case 317/82 (Usines Gustave Boël et Fabrique de ier de Maubeugev Commission [1983] ECR 2041), according to which the existence of exceptional difficulties is to be inferred from the situation with regard to a given category of products — hence, in this case, the heavy sections at issue — and not from whether the undertaking's aggregate results are positive or negative.
The Commission observes that Article 14 does not define exceptional difficulties. Nevertheless, Article 14 does not apply to a profitable undertaking (although the Commission admits that it has granted additional quotas under Article 14 to a profitable undertaking which was undergoing difficulties of a special nature which could not be alleviated by recourse to another provision). The Commission argues that the existence of exceptional difficulties hinges on the situation of the undertaking as a whole and not on the situation with regard to a specific category of products. Furthermore, in its view, the application of Article 14 depends solely on the losses recorded by the undertaking in the course of the quarter in question. In this case, it contends that the applicant could have recorded a positive operating result during the last quarter of 1984.
3. Aid with a view to covering operating losses
As regards the aid received by the applicant for structural improvement in respect of special depreciation, the applicant contends that the special depreciation relates to measures in connection with closures. The costs involved were normal costs within the meaning of Article 4 of the Aids Code (Commission Decision No 2320/81/ECSC, Official Journal 1981, L 228, p. 14) resulting from the partial or total closure of steel plants. In any event, aid paid for that reason is not aid intended to cover operating losses within the meaning of Article 14 of Decision No 234/84/ECSC. In the applicant's view, it is the aim for which aid is paid and not the actual suitability of the aid for the purpose of reducing operating losses which is the determining factor, and it refers in that context to the Court's judgment of 15 January 1985 in Case 250/83 (Finsider v Commission [1985] ECR 131), in which the Court recognized that distinction. The Commission's approach would prevent Article 14 from applying to the grant of almost all aid other than aid for closure within the meaning of the Aids Code.
The Commission considers that the application of Article 14 depends on whether the aid is actually capable of helping to cover operating losses. In this case, the Commission observes that the aid for structural improvement is only partially closure aid within the meaning of the Aids Code (which thus does not preclude the application of Article 14), only the aid for the benefit of employees affected by restructuring measures being such aid. In contrast, the other aid was granted in respect of the depreciation of the plant closures and because of the long-term reduction in utilized capacity; it is aid with a view to covering operating losses since it has the effect of reducing the undertaking's losses. In so far as it compensates for inadequate turnover and, as a result, alleviates an undertaking's difficulties, that undertaking may not also qualify for an adjustment of quotas pursuant to Article 14, since that article was designed precisely to avoid the overlapping of those two advantages.
The Commission also points out that the Government of the Federal Republic of Germany considers that at least part of the aid for structural improvement is operating aid, this being clear from the wording of the directive of the Federal Minister for Economic Affairs, cited above, which draws attention to the need to comply with, in particular, Article 5 (1) of the Aids Code. For its part, in its decisions addressed to the German Government relating to releasing instalments of aid the Commission has treated aid for structural improvement as aid for continued operation.
Finally, both the applicant and the Commission refer to the versions of Article 14 of Decision No 234/84/ECSC which were contained in earlier decisions.
1 Language of the Case: German.