Report for the Hearing delivered in Case 344/85

I — Legal background to the dispute

Steel products in Category V (reinforcing bars) were made subject to a system of production quotas by Commission Decision No 1831/83/ECSC of 24 June 1981 establishing for undertakings in the iron and steel industry a monitoring system and a new system of production quotas in respect of certain products (Official Journal 1981, L 180, p. 1).

The provisions applicable to the present case are contained in Commission Decision No 2177/83/ECSC of 28 July 1983 on the extension of the system of monitoring and production quotas for certain products of undertakings in the steel industry (Official Journal 1983, L 208, p. 1). That decision, according to Article 18 (2) thereof, applies during the period from 1 July 1983 to 31 January 1984.

As is indicated in Section 2 of its preamble, the decision at issue maintains in effect, subject to certain adjustments, the production quota system established by Commission Decision No 1696/82/ECSC of 30 June 1982 (Official Journal 1982, L 191, p. 1).

The underlying principles and the provisions of Decision No 2177/83/ECSC which constitute the legislative framework of the present dispute are as follows.

Article 11 (1) provides generally that a tolerance of 3% in excess is to be allowed on production and delivery quotas. However, production and deliveries of all categories of products (Categories I to VI) may not exceed the sum of the two corresponding quotas allocated for each of those categories.

Article 11 (2) provides, inter alia, that in the case of undertakings which produce only one category of steel products, a tolerance of 3% in excess of the delivery quota is to be allowed within the limit of the production quota for the product category concerned. However, that tolerance may not be combined with that provided for in paragraph 1.

Article 2 (1) of Decision No 1696/82/ECSC thus imposes on undertakings, in addition to an obligation to report each month their production and deliveries of the steel products concerned by the decision (Categories I to VI), the obligation to report their stock position as at 30 June 1982.

Article 2 (1) of Decision No 2177/83/ECSC, which succeeded Decision No 1696/82/ECSC, limited the obligation to report the stock position as at 30 June 1983 to products in Categories II and III.

II — Origin and development of the dispute

By letter of 11 October 1983, the Commission informed Ferriere San Carlo of its production and delivery quotas in respect of steel products in Category V (reinforcing bars) for the fourth quarter of 1983. Those quotas were fixed on the basis of Decision No 2177/83/ECSC and consisted of production quotas of 9172 tonnes of which 6819 tonnes could be delivered on the common market.

By decisions communicated to Ferriere San Carlo on 29 December 1983, the Commission increased those quotas for the fourth quarter of 1983. In addition, in regard to the production quotas, the Commission took account of the possibility provided for in Article 11 (3) (a) of Decision No 2177/83/ECSC of carrying forward 5% of the production quota allocated for the preceding quarter which had not been entirely used up. The production quota was thus increased to 10876 tonnes and the delivery quota to 8028 tonnes.

By letter of 24 July 1984 addressed to Ferriere San Carlo, the Commission:

Ferriere San Carlo submitted its comments both in writing and orally, namely in letters of 2 August and 2 November 1984, during a meeting held on 4 December 1984 between representatives of the undertaking and the Commission departments concerned, by telex of 24 January 1985 and by letter of 20 February 1985.

Ferriere San Carlo does not contest the fact that it exceeded its delivery quotas, but claims that:

The Commission considered that the observations submitted by Ferriere San Carlo were not relevant, and therefore, by decision of 9 October 1985, imposed a fine on it under Article 58 of the ECSC Treaty of ECU 117150, that is to say LIT 174800000. That decision was communicated to San Carlo on 19 October 1985.

In the statement of the reasons on which the decision was based, the Commission pointed out that the last two arguments relied on by Ferriere San Carlo could not be accepted on the grounds that the conduct of other undertakings and events which occurred in January 1985 could not justify an offence which occurred at the end of 1983.

The Commission also points out that its practice in regard to stocks of Category V steel products held by undertakings on 30 June 1981 and 30 June 1982 was justified by the concern:

According to the Commission, it follows from Article 2 (1) of Decision No 2177/83/ECSC, which limits the obligation to report stocks on hand on 30 June 1983 to products in Categories II and III, that stocks of products in other categories were considered to have been definitively disposed of.

However, having regard to the uncertainty which reigned during the fourth quarter of 1983 in regard to the possible continuance of the previous practice, the Commission states that it calculated the fine in this case not at the rate of ECU 100 per tonne of excess provided for in Article 12 of Decision No 2177/83/ECSC, but on the basis of ECU 50 per tonne of excess.

The application in this case was lodged at the Court Registry on 15 November 1985.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to order measures of inquiry in accordance with Article 21 of the Sutu te and Article 45 of the Rules of Procedure.

By letter of 6 March 1987, the Registrar informed the Commission of the Court's questions and requested it to reply before 9 April 1987.

The Commission replied within the prescribed time-limit.

In accordance with Article 54 of the Rules of Procedure, the date for the opening of the oral procedure was fixed after the preparatory inquiry had been completed.

In accordance with Article 95 (1) of the Rules of Procedure, the Court, by order of 26 February 1987, assigned the case to the Fifth Chamber.

III — Conclusions of the parties

Ferriere San Carlo claims that the Court should :

The Commission contends that the Court should:

IV — Summary of the submissions and arguments of the parties

Ferriere San Carlo considers that the contested decision is unfounded for various reasons, which may be grouped as follows:

The applicant claims that the Commission's approach, establishing new situations at the beginning of each quarter without taking account of the production authorized in previous quarters, is anti-economic inasmuch as no normally managed undertaking can plan its deliveries to within one month.

That approach is also disproportionate having regard to the manner in which undertakings are penalized, inasmuch as they can use only 50% of their production capacity, precisely because of the establishment of a system of production quotas. The applicant points out in that regard that it has laid off its staff for a period of several weeks, spread out over the year, in order to comply with the production quotas allocated to it.

The Commission states that:

However, the stocks in question were deemed to have been definitively exhausted when Decision No 2177/83/ECSC was adopted. That is why Article 2 (1) limits the obligation to report stocks to steel products in Categories II and III.

V — Reply of the Commission to the questions put by the Court

First question

During the period in which Decision No 1831/81/ECSC was in force, did the Commission authorize the delivery outside the quota system of stocks of Category V products in existence on 30 June 1981?

Answer

During the period in which Decision No 1831/81/ECSC was in force, the Commission adopted no decision authorizing the delivery outside the quota system of stocks of Category V products in existence on 30 June 1981. The Commission states that it did not require undertakings to report the quantities produced before the entry into force of Decision No 1831/81/ECSC and delivered during the period in which it was in effect. That was done in order to avoid any suggestion of giving retroactive effect to Decision No 1831/81/ECSC.

Second question

During the period in which Decision No 1696/82/ECSC was in force, did the Commission authorize the delivery outside the quota system of stocks of Category V products existing on 30 June 1982, or merely stocks existing on 30 June 1981 and not yet disposed of?

Answer

During the period in which Decision No 1696/82/ECSC was in force, the Commission adopted no decision authorizing the delivery outside the quota system of stocks of Category V products. The Commission would like to draw the Court's attention to the fact that the second subparagraph of Article 2 (1) of Decision No 1696/82/ECSC provides that in the case of products referred to in Article 4, undertakings shall be required to report their stock position as at 30 June 1982, whereas Decision No 1831/81/ECSC makes no mention of stocks. The purpose of the reporting obligation is to permit monitoring of the production quota system (see Section 3 of the preamble to Decision No 1696/82/ECSC).

On the practical level, the obligation to report the stock position was advantageous for undertakings. The Commission, on the basis of the information received, was able to treat all undertakings in the same way. Even undertakings which had not reported stocks under the previous decision were allowed to take advantage of their existence.

Third question

The Commission states that after the adoption of Decision No 2177/83/ECSC no further delivery outside the quota system of stocks of Category V products was possible. Does that change of policy result from the adoption of an express regulatory provision? If so, which provision? If not, was the Commission's change of policy brought to the attention of the companies concerned, and in what way?

Answer

The Commission states that Decision No 2177/83/ECSC made no change in the policy followed in that regard. That decision applies to stocks of Category II and III products, whereas Fernere San Carlo manufactures only Category V products. Consequently, the date to which reference must be made in regard to stocks of products in that category is 30 June 1982.

1 Language of the Case: French.