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Judgment of the Court of 12 February 1960. - Société métallurgique de Knutange v High Authority of the European Coal and Steel Community. - Joined cases 15-59 and 29-59. European Court reports French edition Page 00011 Dutch edition Page 00011 German edition Page 00011 Italian edition Page 00011 English special edition Page 00001 Danish special edition Page 00159 Greek special edition Page 00361 Portuguese special edition Page 00369

Summary Parties Subject of the case Grounds Decision on costs Operative part

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1 . PROCEDURE - APPLICATION FOR ANNULMENT - DECISIONS OF THE HIGH AUTHORITY - PREMATURE NOTIFICATION - PERMISSIBILITY

( ECSC TREATY, ARTICLE 31 )

2 . COMMON MARKET - FERROUS SCRAP - EQUALIZATION - DECISION N . 2/57 OF THE HIGH AUTHORITY - FUNDAMENTAL PURPOSE

( ECSC TREATY, ARTICLE 53; DECISION N . 2/57 OF THE HIGH AUTHORITY, ARTICLE 3 ( 2 ))

3 . COMMON MARKET - FERROUS SCRAP - EQUALIZATION - DECISION N . 2/57 OF THE HIGH AUTHORITY - ACCOUNTING PERIOD AND REFERENCE PERIOD

( ECSC TREATY, ARTICLE 53; DECISION N . 2/57 OF THE HIGH AUTHORITY, ARTICLE 3 ( 2 ))

4 . COMMON MARKET - FERROUS SCRAP - EQUALIZATION - DECISION N . 2/57 OF THE HIGH AUTHORITY - ACCOUNTING PERIOD AND REFERENCE PERIOD, RESPECTIVE PURPOSES

( ECSC TREATY, ARTICLE 53; DECISION N . 2/57 OF THE HIGH AUTHORITY, ARTICLE 3 ( 2 ))

5 . CARTELS - AUTHORIZATION

( ECSC TREATY, ARTICLES 53 AND 65 )

6 . APPLICATION FOR ANNULMENT - SYSTEM DEEMED EXPEDIENT BY THE HIGH AUTHORITY - SCOPE OF THE COURT'S POWER OF REVIEW

( ECSC TREATY, ARTICLE 33 )

7 . COSTS - COSTS UNREASONABLE INCURRED

( RULES OF PROCEDURE, ARTICLE 69 ( 3 ))

AN APPLICATION AGAINST A LETTER CONSTITUTING PREMATURE NOTIFICATION OF A DECISION WHICH WAS ONLY FORMALLY ADOPTED AFTER THE LODGING OF THAT APPLICATION IS NOT INADMISSIBLE ON THAT GROUND IF, AT THE TIME WHEN THE OBJECTION OF INADMISSIBILITY IS RAISED, THE HIGH AUTHORITY HAS ALREADY ADOPTED A FORMAL DECISION CONFIRMING THE CONTENTS OF THE CONTESTED LETTER .

2 . THE MAIN PURPOSE OF DECISION N . 2/57 OF THE HIGH AUTHORITY WAS TO ENCOURAGE UNDERTAKINGS TO ECONOMIZE FERROUS SCRAP, AND THE ADDITIONAL CHARGE ON CONSUMPTION EXCEEDING CERTAIN LEVELS WAS ONLY A MEANS OF ACHIEVING THAT END .

3 . THE SYSTEM ESTABLISHED BY DECISION N . 2/57 OF THE HIGH AUTHORITY, FOR THE PURPOSES OF APPLYING THE ADDITIONAL RATE ON THE CONSUMPTION OF FERROUS SCRAP EXCEEDING THE LEVEL OF CONSUMPTION DURING THE REFERENCE PERIOD, INVOLVES A COMPARISON BETWEEN THE CONSUMPTION DURING THE ACCOUNTING PERIOD ( THREE MONTHS ) AND THE CONSUMPTION DURING THE REFERENCE PERIOD, WHICH IS NOT THE CONSUMPTION OVER SIX MONTHS, BUT THE AVERAGE CONSUMPTION FOR THREE MONTHS TAKEN FROM A PERIOD OF SIX MONTHS CHOSEN BY EACH UNDERTAKING .

4 . THE DETERMINATION OF THE REFERENCE PERIOD AND THAT OF THE ACCOUNTING PERIOD SERVE DIFFERENT PURPOSES . THE PURPOSE OF THE FIRST IS TO ESTABLISH THE AVERAGE CONSUMPTION OF AN UNDERTAKING, WHILE ALLOWING UNDERTAKINGS A CERTAIN FREEDOM OF CHOICE IN THAT RESPECT, AND THE PURPOSE OF THE SECOND IS TO ENCOURAGE UNDERTAKINGS TO ECONOMIZE FERROUS SCRAP .

5 . THE PURPOSE OF ARTICLE 65 ( 2 ) ( B ) OF THE ECSC TREATY IS TO PREVENT THE AUTHORIZATION OF AGREEMENTS WHICH ARE MORE RESTRICTIVE THAN IS NECESSARY IN ORDER TO ACHIEVE THE RESULT IN CONSIDERATION OF WHICH THE AUTHORIZATION IS GRANTED IN DEROGATION OF THE GENERAL PROHIBITION LAID DOWN BY ARTICLE 65 ( 1 ). THEREFORE THAT PROVISION CANNOT BE RELIED UPON WHERE THE PROPOSITION TO BE ESTABLISHED IS WHETHER THE CONTESTED DECISION IS TOO RESTRICTIVE AS REGARDS THE UNDERTAKINGS TO WHICH IT IS APPLICABLE . EVEN IF IT WERE POSSIBLE TO FIND IN ARTICLE 65 ( 2 ) ( B ) A GENERAL PRINCIPLE PROHIBITING THE HIGH AUTHORITY FROM TAKING MEASURES MORE RESTRICTIVE THAN IS NECESSARY FOR THOSE PURPOSES, THE MECHANISM ESTABLISHED BY DECISION N . 2/57 OF THE HIGH AUTHORITY WOULD NOT INFRINGE THAT PRINCIPLE .

6 . THE CHOICE MADE BY THE HIGH AUTHORITY, WITHIN THE LIMITS OF THE DISCRETION CONFERRED ON IT BY THE TREATY, AS TO WHAT IS EXPEDIENT IN A GIVEN SYSTEM ( IN THE PRESENT CASE THE LENGTH OF THE ACCOUNTING PERIOD AND OF THE REFERENCE PERIOD ) IS ONLY SUBJECT TO REVIEW BY THE COURT, WHERE APPLICATION IS MADE TO IT UNDER ARTICLE 33 OF THE ECSC TREATY, IF THE COMPLAINT IS MADE, SUBSTANTIATED BY RELEVANT EVIDENCE, THAT THE HIGH AUTHORITY HAS COMMITTED A MISUSE OF POWERS OR HAS MANIFESTLY FAILED TO OBSERVE THE PROVISIONS OF THE TREATY .

7 . IF THE CONDUCT OF THE DEFENDANT HAS ENCOURAGED THE APPLICANT TO MAKE TWO APPLICATIONS, WHERE ONE WOULD HAVE BEEN SUFFICIENT TO SETTLE THE QUESTION IN DISPUTE, IT HAS CAUSED HIM TO INCUR COSTS UNREASONABLY .

IN JOINED CASES 15 AND 29/59

SOCIETE METALLURGIQUE DE KNUTANGE, A LIMITED LIABILITY COMPANY INCORPORATED UNDER FRENCH LAW, HAVING ITS REGISTERED OFFICE IN PARIS, REPRESENTED BY ITS CHAIRMAN AND MANAGING DIRECTOR, JEAN LATOURTE, ASSISTED BY JEAN-PIERRE ARON, ADVOCATE AT THE COUR D'APPEL, PARIS, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF THE CHAMBRE SYNDICALE DE LA SIDERURGIE FRANCAISE ( FRENCH STEEL INDUSTRY ), APPLICANT, V

HIGH AUTHORITY OF THE EUROPEAN COAL AND STEEL COMMUNITY, REPRESENTED BY ITS LEGAL ADVISER, PROFESSOR JULIO PASETTI, ACTING AS AGENT, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT ITS OFFICES, 2 PLACE DE METZ, DEFENDANT,

APPLICATION FOR THE ANNULMENT OF THE ALLEGED DECISION OF THE HIGH AUTHORITY NOTIFIED TO THE APPLICANT BY LETTER OF 27 FEBRUARY 1959, AND OF THE DECISION OF THE HIGH AUTHORITY OF 22 APRIL 1959, AS BASED ON ARTICLE 3 ( 2 ) OF DECISION N . 2/57, WHICH IS VOID,

P . 7

I - ADMISSIBILITY

1 . ADMISSIBILITY OF CASE 15/59

AS REGARDS CASE 15/59 THE DEFENDANT HAS RAISED THE OBJECTION OF INADMISSIBILITY ARGUING THAT AT THE DATE OF THE APPLICATION THE HIGH AUTHORITY HAD NOT TAKEN A DECISION ON THE REQUEST FOR EXONERATION SUBMITTED BY THE APPLICANT UNDERTAKING .

IN THE LETTER OF 27 FEBRUARY 1959, SIGNED BY AN OFFICIAL OF THE HIGH AUTHORITY AND CONTESTED IN APPLICATION 15/59, IT IS STATED THAT 'AFTER INQUIRY, THE HIGH AUTHORITY HAS FOUND THAT THE TERMS OF THE ABOVE-MENTIONED DECISIONS DO NOT ALLOW SUCH EXONERATION TO BE GRANTED TO YOU '. THUS, THAT LETTER CONSTITUTED NOTIFICATION OF A DECISION WHICH HAD APPARENTLY BEEN TAKEN BY THE HIGH AUTHORITY .

ON 22 APRIL 1959 THE HIGH AUTHORITY TOOK A FORMAL DECISION CONFIRMING THE CONTENTS OF THAT LETTER, AND GAVE NOTICE OF IT TO THE APPLICANT BY LETTER OF 6 MAY 1959 .

ALTHOUGH THE NOTIFICATION OF 27 FEBRUARY WAS PREMATURE, BECAUSE ON THAT DATE THE HIGH AUTHORITY HAD NOT YET ADOPTED ITS POSITION, SUCH NOTIFICATION WAS CONFIRMED BY ITS LATER DECISION .

IN ANY EVENT, AS FROM 23 APRIL, THAT IS TO SAY, AFTER THE ADOPTION OF A FORMAL DECISION WHICH REITERATES IN SUBSTANCE THE CONCLUSIONS OF THE CONTESTED LETTER, THE DEFENDANT WAS NO LONGER IN A POSITION TO DENY THE EXISTENCE OF THE DECISION CONTESTED BY APPLICATION 15/59 .

IN THESE CIRCUMSTANCES, APPLICATION 15/59 CANNOT BE DECLARED INADMISSIBLE ON THE GROUNDS INDICATED .

2 . ADMISSIBILITY OF APPLICATION 29/59

THE ADMISSIBILITY OF THIS APPLICATION HAS NOT BEEN CONTESTED AND NO OBJECTION MAY BE RAISED BY THE COURT OF ITS OWN MOTION ON THIS POINT . THEREFORE THE APPLICATION IS ADMISSIBLE .

P . 8

II - SUBSTANCE

THE PARTIES DISAGREE, FIRST, ON HOW MUCH THE APPLICANT PRODUCED DURING THE PERIOD FROM FEBRUARY TO APRIL 1958 COMPARED WITH HOW MUCH IT PRODUCED PREVIOUSLY, SECONDLY, ON THE EXISTENCE OF A RELATIONSHIP OF CAUSE AND EFFECT BETWEEN THE CLOSING OF THE BLAST - FURNACE AND THE INCREASE IN THE CONSUMPTION OF FERROUS SCRAP BY THE APPLICANT AND, FINALLY, ON THE EXISTENCE OF AN INACCURACY IN ONE OF THE RECITALS IN THE PREAMBLE TO THE DECISION OF 22 APRIL 1959 CONCERNING THE DATE ON WHICH THE NEED FOR A COMPLETE RENEWAL OF A BLAST-FURNACE BECAME APPARENT .

HOWEVER, THESE DIFFERENCES CANNOT INFLUENCE THE DECISION TO BE TAKEN IN THE PRESENT CASE, AS THE SUBJECT-MATTER OF THE DISPUTE IS THE LEGALITY OF ARTICLE 3 ( 2 ) OF DECISION N . 2/57 .

THEREFORE IT IS NOT NECESSARY TO EXAMINE THE DISPUTED FACTS .

THE MAIN PURPOSE OF DECISION N . 2/57 WAS TO ENCOURAGE UNDERTAKINGS TO ECONOMIZE FERROUS SCRAP, AND THE ADDITIONAL CHARGE ON CONSUMPTION EXCEEDING CERTAIN LEVELS WAS ONLY A MEANS TO ACHIEVING THAT END .

WITH THAT AIM IN VIEW, A SYSTEM WAS ESTABLISHED WHEREBY ANY CONSUMPTION OF BOUGHT SCRAP BEARS A BASIC RATE, AND CONSUMPTION IN EXCESS OF A CERTAIN LIMIT BEARS AN ADDITIONAL RATE .

FOR THE PURPOSES OF APPLYING THE ADDITIONAL RATE, THE HIGH AUTHORITY, IN EXERCISE OF THE DISCRETION CONFERRED ON IT BY THE TREATY, DEEMED IT EXPEDIENT TO TAKE AN ACCOUNTING PERIOD OF THREE MONTHS INTO CONSIDERATION .

HAVING FIXED THE ACCOUNTING PERIOD, THE HIGH AUTHORITY ALSO HAD TO FIX A REFERENCE PERIOD IN ORDER TO SUBJECT THE CONSUMPTION OF BOUGHT SCRAP EXCEEDING THE LEVEL OF THE CONSUMPTION OVER THE REFERENCE PERIOD TO PAYMENT OF THE ADDITIONAL CONTRIBUTION .

IN ORDER TO DETERMINE THE CONSUMPTION OVER THE REFERENCE PERIOD, THE HIGH AUTHORITY ADOPTED THE PRINCIPLE OF LEAVING THE UNDERTAKINGS FREE TO CHOOSE, WITHIN CERTAIN SET LIMITS, THE PERIOD WHICH SUITED THEM BEST, AND DID SO IN THE OBVIOUS INTERESTS OF THE UNDERTAKINGS THEMSELVES .

HOWEVER, IN ORDER TO PREVENT UNDERTAKINGS FROM CHOOSING EXCEPTIONAL PEAKS IN CONSUMPTION, WHICH WOULD HAVE GONE AGAINST THE PURPOSE OF DECISION N . 2/57, THE HIGH AUTHORITY DEEMED IT EXPEDIENT TO CIRCUMSCRIBE THE UNDERTAKING'S FREEDOM OF CHOICE BY PROVIDING FOR AN AVERAGE, THAT IS TO SAY, HALF THE CONSUMPTION DURING THE PERIOD OF SIX MONTHS OR, IN OTHER WORDS, THE AVERAGE CONSUMPTION OVER A THREE-MONTH PERIOD TAKEN FROM A HALF -YEARLY PERIOD CHOSEN BY THE UNDERTAKING .

P . 9

IN THESE CIRCUMSTANCES, THE SYSTEM ESTABLISHED BY DECISION N . 2/57 INVOLVES A COMPARISON BETWEEN THE CONSUMPTION DURING THE ACCOUNTING PERIOD ( THREE MONTHS ) AND THE CONSUMPTION DURING THE REFERENCE PERIOD, WHICH IS NOT THE CONSUMPTION OVER SIX MONTHS, BUT THE AVERAGE CONSUMPTION FOR THREE MONTHS TAKEN FROM A PERIOD OF SIX MONTHS CHOSEN BY EACH UNDERTAKING .

THE WANT OF SUBSTANCE IN THE APPLICANT'S MAIN COMPLAINT IS THUS MADE CLEAR .

HAVING REGARD TO THE NATURE OF THE MECHANISM DESCRIBED ABOVE, IT COULD HAPPEN, AS IN THE PRESENT CASE, THAT AN UNDERTAKING FOUND ITSELF LIABLE TO PAY THE CONTRIBUTION AT THE ADDITIONAL RATE FOR AN ACCOUNTING PERIOD OF THREE MONTHS, ALTHOUGH ITS EFFECTIVE CONSUMPTION OF BOUGHT SCRAP OVER SIX MONTHS COMPRISING THIS PERIOD OF THREE MONTHS DID NOT EXCEED - OR WAS LESS EVEN THAN - THE CONSUMPTION OVER THE REFERENCE PERIOD .

HOWEVER, TAKING INTO ACCOUNT THE ABOVEMENTIONED FUNDAMENTAL PURPOSE OF DECISION N . 2/57, THIS RESULT DOES NOT REVEAL ANY ILLEGALITY .

THE DETERMINATION OF THE REFERENCE PERIOD AND THAT OF THE ACCOUNTING PERIOD SERVE DIFFERENT PURPOSES . THE PURPOSE OF THE FIRST IS TO ESTABLISH THE AVERAGE CONSUMPTION OF AN UNDERTAKING, WHILE ALLOWING UNDERTAKINGS A CERTAIN FREEDOM OF CHOICE IN THAT RESPECT, AND THE PURPOSE OF THE SECOND IS TO ENCOURAGE UNDERTAKINGS TO ECONOMIZE FERROUS SCRAP .

THE APPLICANT ALSO ARGUES THAT THERE HAS BEEN AN INFRINGEMENT OF ARTICLE 65 ( 2 ) ( B ) TO WHICH ARTICLE 53 ( A ) REFERS .

THE APPLICANT FAILS TO UNDERSTAND THE SCOPE OF THIS PROVISION, THE PURPOSE OF WHICH IS TO PREVENT THE AUTHORIZATION OF AGREEMENTS WHICH ARE MORE RESTRICTIVE THAN IS NECESSARY IN ORDER TO ACHIEVE THE RESULT IN CONSIDERATION OF WHICH THE AUTHORIZATION IS GRANTED IN DEROGATION OF THE GENERAL PROHIBITION LAID DOWN BY ARTICLE 65 ( 1 ).

THEREFORE THAT PROVISION MAY NOT BE RELIED UPON IN THE PRESENT CASE BECAUSE THE APPLICANT DOES NOT ARGUE THAT THE HIGH AUTHORITY HAS AUTHORIZED AN AGREEMENT WHICH IS TOO RESTRICTIVE, BUT THAT THE DECISION IS TOO RESTRICTIVE AS REGARDS THE UNDERTAKINGS LIABLE TO PAYMENT OF EQUALIZATION CHARGES .

MOREOVER, EVEN IF THE APPLICANT HAD ARGUED THAT IT WAS POSSIBLE TO FIND IN ARTICLE 65 ( 2 ) ( B ) A GENERAL PRINCIPLE PROHIBITING THE HIGH AUTHORITY FROM TAKING MEASURES MORE RESTRICTIVE THAN IS NECESSARY FOR THOSE PURPOSES, THAT PRINCIPLE IS NOT INFRINGED BY THE CONTESTED MECHANISM, FIRST, BECAUSE, AS HAS ALREADY BEEN SHOWN, THE COMPARISON BETWEEN THE ACCOUNTING PERIOD AND THE REFERENCE PERIOD DOES NOT SET UP A RELATIONSHIP BETWEEN UNEQUAL TERMS AND, SECONDLY, BECAUSE THE HIGH AUTHORITY WAS FREE TO DETERMINE, ACCORDING TO CONSIDERATIONS OF EXPEDIENCY, THE LENGTH OF BOTH THE ACCOUNTING PERIOD AND THE REFERENCE PERIOD .

THE CRITICISMS MADE BY THE APPLICANT OF THE CRITERIA FOLLOWED BY THE HIGH AUTHORITY IN DETERMINING THE LENGTH OF THE ACCOUNTING PERIOD ONLY CONCERN THE QUESTION WHETHER THE CONTESTED DECISION IS EXPEDIENT .

EXAMINATION BY THE COURT MAY NOT INCLUDE AN INQUIRY INTO THE EXPEDIENCY OF THE MECHANISM, AS SET UP BY THE HIGH AUTHORITY, FOR ACHIEVING THE OBJECTIVES OF THAT DECISION, BECAUSE SUCH EXAMINATION WOULD GO BEYOND THE LIMITS OF THE POWER TO REVIEW QUESTIONS OF LEGALITY WHICH THE COURT MAY EXERCISE BY VIRTUE OF THE TREATY .

SUCH AN EXAMINATION WOULD NECESSARILY COMPRISE AN ASSESSMENT OF THE COMPLEX SITUATION ON THE MARKET WHICH GAVE RISE TO GENERAL DECISION N . 2/57, AN ASSESSMENT WHICH, ACCORDING TO ARTICLE 33 OF THE TREATY, THE COURT MAY NOT MAKE SAVE WHERE THE HIGH AUTHORITY IS ALLEGED TO HAVE MISUSED ITS POWERS OR TO HAVE MANIFESTLY FAILED TO OBSERVE THE PROVISIONS OF THE TREATY .

THE APPLICANT HAS NOT ALLEGED THAT THERE HAS BEEN A MISUSE OF POWERS OR A MANIFEST FAILURE TO OBSERVE THE TREATY .

MOREOVER - AS APPEARS FROM THE FOREGOING - THE COMPLAINTS PUT FORWARD BY THE APPLICANT ARE UNFOUNDED .

THE TWO APPLICATIONS MADE BY THE APPLICANT MUST BE DISMISSED .

HOWEVER, UNDER THE TERMS OF THE SECOND SUBPARAGRAPH OF ARTICLE 69 ( 3 ) OF THE RULES OF PROCEDURE OF THE COURT OF JUSTICE OF THE EUROPEAN COMMUNITIES, THE COURT MAY ORDER EVEN A SUCCESSFUL PARTY TO PAY COSTS WHICH THE COURT CONSIDERS THAT PARTY TO HAVE UNREASONABLY CAUSED THE OPPOSITE PARTY TO INCUR .

THE APPLICANT WAS INDUCED BY THE CONDUCT OF THE DEFENDANT TO LODGE TWO APPLICATIONS ALTHOUGH, HAD THE PREMATURE LETTER OF 27 FEBRUARY 1959 NOT BEEN SENT, ONE APPLICATION ALONE WOULD HAVE BEEN SUFFICIENT .

THEREFORE THE COSTS INCURRED BY THE APPLICANT IN RESPECT OF APPLICATION 15/59 ARE COSTS WHICH THE DEFENDANT HAS UNREASONABLY CAUSED THE APPLICANT TO INCUR . MOREOVER THE DEFENDANT ITSELF ADMITS THIS BECAUSE IT HAS STATED THAT IT IS WILLING TO BEAR THESE COSTS .

THE COURT

HEREBY :

1 . DISMISSES THE APPLICATIONS BROUGHT BY THE APPLICANT AS UNFOUNDED;

2 . ORDERS THE DEFENDANT TO BEAR THE COSTS OF CASE 15/59;

3 . ORDERS THE APPLICANT TO BEAR THE COSTS OF CASE 29/59 .