OPINION OF MR ADVOCATE-GENERAL GAND

DELIVERED ON 18 MAY 1966 (*1)

Mr President,

Members of the Court,

The application upon which you have to decide today is the outcome of a debate which has continued over a long period, concerning facts which are even older.

It has given rise to a very comprehensive written procedure involving in particular the production of numerous documents to which I shall refer later. Moreover, at your own request, valuable details of a technical nature were submitted at the hearing.

The Compagnie des Forges de Châtillon, Commentry et Neuves-Maisons manufactures products in pure iron known as Armco, which is characterized by a particularly high analytical purity. With its sister company (Les Aciéries et Tréfileries de Neuves-Maisons, Châtillon) it appears to be the only company in France to carry on this activity. During the functioning of the equalization scheme, it considered the scrap arising from this manufacture to be ferrous scrap as referred to by the basic decisions of the High Authority and consequently deducted the tonnage of this material from the basis of assessment of its equalization contributions.

This interpretation of the decisions has not always been accepted by the competent bodies. After refusing on 12 June 1958 to accept a deduction in respect of the materials described by the company as arisings from billets, the Imported Ferrous Scrap Equalization Fund (the CPFI) accepted the applicant's point of view on the following 12 August.

As for the departments of the High Authority which had resumed responsibility for the equalization scheme, in 1961 they informed the company that the question of Armco pure iron was under ‘further consideration’ and then in 1962 stated that they intended to incorporate this material into the basis of assessment of the equalization contributions. You will recall that by a judgment of 5 December 1963 you dismissed the application brought by the company against the statement of account addressed to it as inadmissible, on the ground that it did not constitute a decision.

It was in these circumstances that on 11 July 1965 the High Authority decided that the Compagnie des Forges de Châtillon had no right to deduct from the basis of assessment of its contribution the 13831 metric tons of Armco pure iron scrap which it had sold. In fact, as is set out in the statement of reasons for the decision, this iron meets extremely strict criteria of analysis which distinguish it completely from ordinary steel. For this reason this scrap is used essentially by a small number of consumers in order to obtain a high degree of analytical purity in the manufacture of special products. These two circumstances contribute to a market price three times higher than that of ordinary ferrous scrap, which develops independently of the price of this material, and is even higher than the price of certain metal products. On the other hand, its limited market prevents it from exercising any influence on the market for ordinary ferrous scrap. The equalization scheme was in fact established to regulate the supply of the latter. There is, therefore, no reason to make the purchasers of this special scrap bear a contribution intended to reduce the price of imported ferrous scrap which has always cost less than the products in question. From all this the High Authority concludes that to treat Armco pure iron scrap as ferrous scrap as referred to by the scheme was completely alien to the purpose of equalization.

This is the decision which the Compagnie des Forges de Châtillon is referring to you. It is requesting you to annul it and, in the alternative, to order the High Authority to pay 465635.04 French francs by way of damages for a wrongful act or omission on its part.

I — The legality of the contested decision

In order to contest the legality of the decision of the High Authority the applicant puts forward three widely differing arguments.

The first is both legal and technical. The company is attempting to establish that arisings from Armco pure iron constitute ferrous scrap covered by the equalization scheme. Decision No 2/57 only excludes alloy scrap, which is precisely defined. The Armco scrap does not fulfil these conditions and is necessarily subject to the equalization scheme. Moreover, arisings from Armco products are alleged to fall within the definition of ferrous scrap given under No 73-03 of the Brussels European Customs Nomenclature, as they result from scrap obtained in the course of manufacture and are intended for recasting. This Nomenclature is based upon information of a technical nature concerning the origin or use of the material in question; it disregards all considerations of purity or of the selling price of the product in question.

The company is aware, however, that the considerable price difference between these two materials will be put forward in reply to this argument which aims at treating Armco pure iron as ordinary ferrous scrap. It explains this by the fact that by reason of its great purity the primary refining process necessary for ordinary ferrous scrap if a high-quality product is desired is unnecessary when the Armco product is used. Although less pure than Armco scrap, the pre-refined ferrous scrap is nevertheless sufficiently pure to be used in the same way as Armco arisings in the manufacture of high-quality steel. This being so, it is reasonable that the difference between the price of Armco iron and ordinary ferrous scrap should approximately represent the cost of the primary refining process. The company produces various graphs to demonstrate that from January 1955 to the end of 1957 the difference between the prices of Armco pure iron and of ordinary ferrous scrap remained at approximately 255 francs and that with three exceptions it did not vary by more than 4 %.

What is the High Authority's answer to this argument which is based on the narrowest possible interpretation of the wording of Decision No 2/57?

It refers first to the fact that products of Armco pure iron and the scrap produced by their manufacture are characterized by an exceptionally high degree of analytical purity; their value thus arises from their composition rather than from the form or dimensions of the product which incorporates them.

Second and more important is the idea that, although the term ferrous scrap covers an extremely wide variety of materials of differing origin and type, it is above all a recovered product. The High Authority expressly disputes — and this is an essential point in the debate — that the Armco products have this character, for they were manufactured to order, fulfilled specific conditions of analysis and sometimes had particular dimensions.

I shall not again go over the most interesting technological information which counsel for the applicant presented at the hearing as to the manufacturing process of the products in question. Despite its interest, I do not consider it to be completely convincing, nor such as to destroy the effect produced by certain correspondence placed on the file which supports the High Authority's argument. I am thinking, for example, of the letter from the Société des Acieries du Forez annexed to the statement of defence. The description of ‘arisings from billets’ employed by the supplier is there disputed, since they are in fact billets cut into blooms to facilitate their charging in the electric furnace and paid for at the normal price for billets, as increased by a supplement for the cutting.

In spite of the ingenious explanation given by the company, I consider even more significant two letters addressed by Armco to Etablissements Bedel and produced on 6 April last by the High Authority. The first announces a delay in the delivery of recovered billets for re-casting as technical reasons prevented ‘production of the special grade castings intended for you’. The second letter notes the same customer's order for billets and informs it that the necessary quantities will be incorporated into the manufacturing programmes. This gives the impression that, unlike own resources of ferrous scrap, billets for re-casting did not constitute undesirable by-products, a necessary evil in the production of another product which is the essential aim of the manufacturing process, but are, on the contrary, the object of the company's activities. All this suggests that we are not dealing with recoveries of scrap but with semi-finished products in iron and steel in the true sense.

The High Authority emphasizes that during the functioning of the equalization scheme the applicant's actions appeared to demonstrate that it regarded the material in question as a semi-finished product. Until the middle of 1957 it lodged two sets of price lists with the High Authority, entitled respectively the ‘Price list for semi-finished products in Armco pure iron for re-rolling’ and the ‘Price list for semi-finished products in Armco pure iron for re-casting’, although it was not obliged to do so if these latter products in fact constituted ferrous scrap. No doubt this fact can be explained by certain of its departments' failing to appreciate certain Community provisions. Of course, it maintains that the scrap in question was sold exclusively according to the second price list, at a price which was 5 % lower than that in the price list for re-rolling, but the High Authority rightly considers that such a difference is unimportant if it is remembered that in normal circumstances new ferrous scrap is sold at a price representing 30 % or 40 % of the price of iron and steel products.

The defendant also expressly contests the argument put forward by the company to the effect that the price of the material in question was directly dependent on that of ordinary ferrous scrap, the difference corresponding more or less to the cost of the primary refining process. The graph produced shows the alleged parallel to be rather unclear. For example, the selling price of Armco suffered two severe increases in October 1955 and March 1956 and remained stable between these two dates, whereas the price of ordinary ferrous scrap increased steadily during that period. Moreover, as the applicant itself admits that, although there were two price lists, the difference between the price of the products in question and that of the billets for re-rolling has remained constant, its argument loses all force, since it cannot reasonably be maintained that the price of the billets for re-rolling was directly dependent on that of pre-refined ferrous scrap or ordinary ferrous scrap, as these billets were not used as a substitute for ferrous scrap. It appears, rather, that the price of billets for re-casting was controlled by the price of billets for re-rolling but remained slightly lower as the product required less care, having regard to the purpose for which it was intended.

Although the Compagnie des Forges de Châtillon claims that a parallel existed between the prices of Armco pure iron and ordinary ferrous scrap, so that the former could be recognized as ferrous scrap, we have seen that it also maintains that the Brussels Customs Nomenclature and, in a general way, the decisions which define ferrous scrap and semi-finished products, only take into account information of a technical nature, as a result of which it disregards completely the selling price of the product in question. On this point again there is complete disagreement between the applicant and the High Authority. The latter recalls that Decision No 28/53 of 13 March 1953 concerning the fixing of maximum prices for the purchase of ferrous scrap established price differentials for all categories of ferrous scrap which were applicable in relation to the basic category. As no special differential was provided for arisings from Armco iron, it should, if considered to be ferrous scrap, have been sold at the price of ordinary ferrous scrap during the whole period for which maximum prices were fixed. The applicant did not so sell it, which tends to show that it did not itself consider its products to be ferrous scrap.

The Compagnie des Forges de Châtillon replies that, as the maximum price regulations concern an area of activity which has no connexion with the equalization scheme, they cannot be used as a basis of argument in the present action. Such an assertion is very doubtful. It was clear from the very beginning of the Common Market in coal and steel that the sudden opening of the frontiers would result in an excessive increase in the price of ferrous scrap on most of the national markets. It is this consideration which led from the beginning to both the fixing of maximum prices for ferrous scrap on the setting up of the Common Market and the establishment of an equalization scheme for imported ferrous scrap. The purpose of these two measures was the same and their field of application was identical. There is no evidence on which it can be stated that the ferrous scrap referred to in Decision No 28/53 is different from that referred to in Decisions Nos 22/54, 2/57 and 16/58. On the contrary, several decisions concerning the equalization of ferrous scrap refer expressly to the price differences in Annex I to Decision No 28/53. If, as the applicant rightly believed at the time, arisings from Armco iron were not covered by the rules as to maximum prices, it is quite arbitrary to claim that the ferrous scrap equalization scheme applies to it today.

If I must now choose between these two opposing arguments, I shall not hesitate to choose that put forward by the High Authority for reasons of law, of economics and, I would also add, of common sense. In my opinion, scrap from Armco pure iron cannot be regarded as ferrous scrap. That part which consists of semi-finished products (arisings from billets) falls within the category of arisings from rolling which, according to Form 2/50, cannot be regarded as ferrous scrap to the extent that it is used as a semi-finished product. As regards scrap intended for re-casting, whilst it may, in common with ferrous scrap, have the character of arisings, it is distinguishable on other points, for example, by dimensions different from those accepted as standard by Decision No 28/53 (one of the High Authority's most recent documents refers to billets of 2200 millimetres) and in particular, as we have seen, by the price, the conditions of production and the quality.

Secondly, the contested decision has shown quite clearly how the restricted market in this scrap in France prevented it from having any influence upon the market in ordinary ferrous scrap which the equalization scheme was designed to control. It has also shown that it was absurd to make the purchasers of this scrap liable for a contribution intended to reduce the price of imported ferrous scrap, which is already less expensive than the product in question. To treat scrap from Armco pure iron in the same way as ordinary ferrous scrap was thus alien to the purpose of the scheme.

If, as I suggest, you reject this first submission based upon the infringement of Article 53 (b) of the Treaty and the general decisions governing equalization, you must necessarily consider that, contrary to the applicant's claims, the contested decision is neither vitiated by a failure to give reasons nor is it based upon incorrect reasons.

You will also not accept the argument that, if they avoided paying the equalization contribution, purchasers of the scrap in question received an undue advantage over purchasers of ordinary ferrous scrap, which would constitute an infringement of Article 4 (b) of the Treaty, which prohibits discrimination. One may agree with the High Authority that, on the contrary, the discrimination arose from the argument of the Compagnie des Forges de Châtillon. The result of this argument was, first, to make the purchasers of this scrap pay the price of a semi-finished iron and steel product as increased by the equalization contribution and, secondly, to obtain for the applicant the advantage both of this price and of the deduction of the sales in question from the basis of assessment of its contribution.

I must, however, deal in more detail with the other submission put forward in support of the application for annulment. The applicant maintains that the contested decision infringes the rules applicable to the revocation of administrative measures and adversely affects the rights which it held under agreements with the CPFI of 12 June and 12 August 1958. On the first of these dates the Fund had accepted the deductions made, with the exception of those concerning arisings from billets, and its decision had been brought to the notice of the High Authority. Two months later it had agreed to all the deductions claimed. These two measures, which were in accordance with Decision No 2/57, could not be revoked with retroactive effect.

Even if were to be admitted that these agreements were irregular, their retroactive revocation seven years later was, it is said, irregular as it occurred after the end of the reasonable period of time within which illegal administrative measures may be revoked.

In replying to this last argument — the only one which you can accept if you follow my opinion — the High Authority is very brief. It merely refers to its general Decision No 13/58 according to which, at the moment when it resumed responsibility for the equalization scheme, it reserved the right to annul prior decisions concerning equalization. It also refers to its letters of 1961 and 1962, the first of which announced that the question of Armco pure iron was being reconsidered and the second of which made known the High Authority's intention to incorporate it in the basis of assessment to contribution.