«(Interim proceedings – Competition – Payment of a fine – Bank guarantee – Urgency – None)»

Order of the President of the Court of First Instance, 20 October 2003

Summary of the Order

Interim measures – Suspension of operation – Conditions for granting – Prima facie case – Serious and irreparable damage – Cumulative conditions – Consequences (Arts 242 EC and 243 EC; Rules of Procedure of the Court of First Instance, Art. 104(2))

Interim measures – Suspension of operation – Suspension of the obligation to provide a bank guarantee as a condition for not requiring immediate payment of a fine – Conditions for granting – Exceptional circumstances (Art. 242 EC)

An application for interim measures must specify the circumstances giving rise to the urgency and the pleas in fact and in law justifying prima facie (fumus boni juris) the granting of the interim measure sought. These conditions are cumulative, so that an application for suspension must be dismissed if one of them is lacking. see para. 12

An application for suspension of the obligation to provide a bank guarantee as a condition for not requiring immediate payment of a fine can be accepted only in exceptional circumstances. The possibility of requiring the provision of a financial guarantee is explicitly laid down for interim proceedings by the Rules of Procedure of the Court of Justice and the Court of First Instance and corresponds to a general and reasonable course of conduct on the part of the Commission. The existence of such exceptional circumstances may, in principle, be regarded as being established when the party seeking to be exempted from provision of the required bank guarantee adduces evidence that it is objectively impossible for it to provide that guarantee or that providing it would endanger its existence. The relevance of that evidence must be assessed in the light of the objective economic situation of the applicant. see paras 32-35

20 October 2003 (1)

((Procedure for interim relief – Competition – Payment of fine – Bank guarantee – Urgency – None))

In Case T-46/03 R,

Leali SpA, established in Odolo (Italy), represented by G. Belotti and G. Vezzoli, lawyers,

applicant,

supported by Italian Republic, represented by I.M. Braguglia, acting as Agent,

intervener,

Commission of the European Communities, represented by L. Pignataro and A. Whelan, acting as Agents, with an address for service in Luxembourg,

defendant,

APPLICATION for suspension of operation of the Commission decision of 17 December 2002 relating to a proceeding under Article 65 CS (COMP/37.956 ─ concrete reinforcing bars), inasmuch as it imposes on the applicant, jointly and severally with Acciaierie e Ferriere Leali Luigi SpA, in liquidation, a fine of EUR 6 093 million and, solely on the applicant, a fine of EUR 1 082 million,

THE PRESIDENT OF THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES

makes the following

Facts and procedure

1.1

On 17 December 2002 the Commission adopted a decision relating to a proceeding under Article 65 CS (COMP/37.956 ─ concrete reinforcing bars) (hereinafter the Decision). According to Article 1(1) of the Decision, the 11 undertakings and the association of undertakings listed therein, among which is the applicant, infringed Article 65(1) CS by operating a cartel on the Italian market for concrete reinforcing bar in bars or coils aimed at price-fixing and the limitation or concerted monitoring of production and/or sales.

Article 2 of the Decision imposes a fine of EUR 6.093 million on the applicant, jointly and severally with Acciaierie e Ferriere Leali Luigi SpA (hereinafter AFLL), in liquidation, and a fine of EUR 1.082 million solely on the applicant, for the infringement found in Article 1. The reasons why the applicant is ordered to pay the fine jointly and severally with AFLL are given in recitals 490 and 491 of the Decision. It is apparent inter alia that the applicant took over and continued AFLL's activities in the course of that company's liquidation at the end of 1998. The Commission considers that there is therefore a continuity of activity from an economic point of view between AFLL and the applicant. For the purposes of paying the fine, the Decision distinguishes between AFLL's conduct until it went into liquidation, which is attributed jointly and severally to that company and to the applicant, and the applicant's conduct from the time it was set up, which is attributed to it alone.

Article 3 of the Decision provides that the fines thus fixed are to be paid within a period of three months from the date of notification. The Decision was notified by letter of 20 December 2002, in which it was stated that, if the applicant brought an action before the Court of First Instance, the Commission would not take any steps to recover the fine while the case was pending before that Court, provided that interest accrued on the amount due from the date on which the period for payment expired and that an acceptable bank guarantee were provided by that date at the latest.

By application lodged at the Registry of the Court of First Instance on 11 February 2003, the applicant brought an action pursuant to the fourth paragraph of Article 230 EC for the annulment of the Decision and, in the alternative, the cancellation or reduction of the fine which had been imposed on it.

5.5

By separate document lodged at the Court Registry on 15 May 2003, the applicant applied for suspension of the operation of the Decision.

The Commission submitted its written observations on the application for interim measures on 5 June 2003.

7.7

By application lodged at the Registry on 22 May 2003, the Italian Republic requested leave to intervene in support of the form of order sought by the applicant. By order of 13 June 2003, the President of the Court granted the Italian Republic leave to intervene and invited it to submit its observations at the hearing.

8.8

The hearing before the judge hearing the application for interim measures was held on 4 July 2003.

9.9

At the hearing, the President of the Court authorised the applicant to produce certain additional documents. Those documents were produced on 11 July 2003. The Commission submitted its written observations on those documents by letter which arrived at the Court Registry on 23 July 2003.

10.10

On 8 August 2003, the applicant replied to the written questions put by the President of the Court on 17 July 2003. The Commission submitted its observations on the applicant's replies on 10 September 2003.

Law

11.11

Under the combined provisions of Articles 242 EC and 243 EC and under Article 225(1) EC, the Court of First Instance may, if it considers that the circumstances so require, order the suspension of the contested act or prescribe any necessary interim measures.

12.12

Article 104(2) of the Rules of Procedure of the Court of First Instance provides that an application for interim measures must state the circumstances giving rise to the urgency and the pleas of fact and law establishing a prima facie case for the interim measures applied for. Those requirements are cumulative, so that an application for suspension of operation must be dismissed if any one of them is not met (order of the President of the Court of Justice in Case C-268/96 P(R) SCK and FNK v Commission [1996] ECR I-4971, paragraph 30).

Arguments of the parties

Prima facie case

13.13

In order to show that the condition with regard to a prima facie case is satisfied, the applicant raises five pleas.

14.14

The applicant claims, first, that the Commission wrongly adopted the Decision on the basis of Article 65 CS even though the ECSC Treaty expired five months beforehand, on 23 July 2002. In the absence of measures intended to extend the effects of the ECSC Treaty, the Decision has no legal basis. According to the applicant, the definition of pending legal relationships and the reallocation of powers which lapsed following the expiry of the ECSC Treaty should have been the subject of an express legislative measure adopted by the Member States.

15.15

Secondly, the applicant complains that the Commission regarded AFLL and the applicant as a single undertaking for the purposes of applying penalties.

16.16

Thirdly, the Commission infringed the rights of the defence, in that it failed to inform the applicant that another undertaking had cooperated with its staff. The Commission also unlawfully failed to communicate to the applicant a document produced by that undertaking, which, in the statement of objections, was regarded as evidence against the applicant.

17.17

Fourthly, the applicant claims that the Commission has not proved the existence of an agreement or concerted practice between the undertakings to which the Decision is addressed.

18.18

Lastly, the fine imposed by the Decision should be reduced, since the Commission was mistaken with regard to the duration of certain infringements.

19.19

The Commission submits that none of the pleas in law raised by the applicant demonstrates the existence of a prima facie case.

Urgency

The applicant considers that the condition relating to urgency is satisfied in this case.

21.21

It points out, first of all, that AFLL is a company in liquidation and constitute an empty shell, which is why it falls to the applicant to provide the Commission with a bank guarantee for the whole penalty, that is, the sum of EUR 7.175 million together with interest.

22.22

In order to prove that it is impossible for it to provide the bank guarantee, the applicant refers to letters of 20 and 21 January and 7 May 2003 from two banks with which it usually deals. According to those letters, the banks in question are refusing to set up the bank guarantee requested.

23.23

The applicant also states that it is undergoing a very serious financial crisis and that the enforcement of the Decision might lead to its permanent disappearance from the market.

24.24

The report on its liquid assets at 31 December 2001 shows trading losses, for 2001, of EUR 8.128 million, while other financial reports, namely, the balance sheets and an accountant's report for the period 1998-2001, show total accumulated losses of more than EUR 22 million.

25.25

Furthermore, as is apparent from the Decision itself, the balance sheet for the years 2000 and 2001 reveals short-term debts to banks of EUR 49.630 million.

26.26

The applicant adds that it has no immediately realisable assets nor any debts owing from third parties. The only assets against which the Commission could move are plant and production line machinery, the technological importance and commercial value of which are, moreover, slight.

27.27

Finally, a recent accountant's report dated 8 May 2003 shows that it would be impossible for the applicant to pay the fines, if they were required to be paid. The report also shows that, if the fine had to be paid, even in part, it could mean the permanent cessation of the company's activity and its subsequent withdrawal from the market.

28.28

In those circumstances, the implementation of the decision would harm not only the applicant but also the competitive nature of a market already highly concentrated.

29.29

The Commission maintains that the applicant has not proved that it is objectively impossible for it to provide the bank guarantee or that such provision would imperil its existence.

Findings of the judge hearing the application for interim measures

Object of the application

30.30

Before ruling on the present application for interim relief, it is appropriate to define precisely the object of the proceeding. By its application, the applicant seeks an order suspending the operation of the decision, which imposes a fine of EUR 6.093 million on the applicant jointly and severally with AFLL, in liquidation, and, solely on the applicant, a fine of EUR 1.082 million.

31.31

It is not in dispute that, in its letter of notification of the decision of 20 December 2002, the Commission informed the applicant that, if it brought an action before the Court of First Instance, no steps would be taken to recover the fine while the case was pending before that Court, provided that interest accrued on the amount due from the date on which the period for payment of the fine expired and that a bank guarantee acceptable to the Commission and covering both the amount of the principal sum and the interest and accruals becoming due thereon, were provided at the latest by that date. Accordingly, the object of the application is, in fact, solely to obtain dispensation from the obligation to provide a bank guarantee as a condition for the fine, in the amount imposed by the Decision, not being recovered immediately.

Urgency

32.32

It is settled case-law that an application for suspension of the obligation to provide a bank guarantee as a condition for the fine not being recovered immediately will only be granted in exceptional circumstances (orders of the President of the Court of Justice in Case 107/82 R AEG v Commission [1982] ECR 1549, paragraph 6, and Case C-7/01 P(R) FEG v Commission [2001] ECR I-2559, paragraph 44). The possibility of requiring the provision of a financial guarantee is expressly laid down with regard to applications for interim relief by the Rules of Procedure of the Court of Justice and of the Court of First Instance, and in accordance with a general and reasonable policy pursued by the Commission.

33.33

The existence of such exceptional circumstances may, in principle, be regarded as established where the party seeking dispensation from the obligation to provide the requisite bank guarantee adduces evidence that it is objectively impossible for it to provide such guarantee (see, to that effect, orders of the President of the Court in Case C-364/99 P(R) DSR-Senator Lines v Commission [1999] ECR I-8733, and FEG v Commission, cited above) or that such provision would imperil its existence (see, among others, to that effect, orders of the President of the Court of First Instance in Case T-295/94 R Buchmann v Commission [1994] ECR II-1265, paragraph 24, and Case T-191/98 R II Cho Yang Shipping v Commission [2000] ECR II-2551, paragraph 43).

34.34

In the present case, in order to prove that it is unable to provide the bank guarantee, the applicant has produced three letters, of 20 and 21 January and 7 May 2003, according to which two banks, in general terms, have indicated that they would refuse to grant the guarantee requested. In the letter of 7 May 2003, the bank in question, which is the applicant's usual bank, reiterates its refusal, expressly stating that the current total amount of the applicant's credit makes any further increase in credit impossible.

35.35

The relevance of those letters must be assessed in the light of the applicant's objective financial situation (see to that effect Cho Yang Shipping v Commission, cited above, paragraph 43).

36.36

In that regard, the applicant claims that it is undergoing a very serious financial crisis, and refers to a series of documents which it attaches to its application for interim measures. Those documents show that the applicant suffered trading losses, for 2001, of EUR 8.128 million, that it had total accumulated losses of more than EUR 22 million and that it has short-term debts to banks of EUR 49.630 million. Furthermore, it has no immediately realisable assets nor any debts owing from third parties, and the only assets against which the Commission could move are plant and production line machinery. Finally, a recent accountant's report dated 8 May 2003 shows that the applicant would be unable to pay the fines, if they were required to be paid.

37.37

In order to verify the accuracy of those claims, the judge hearing the application for interim measures put a series of written questions to the applicant and asked it to produce certain documents, inter alia the balance sheet for the financial year 2002.

38.38

The judge hearing the application for interim measures considers that the explanations and documents provided by the applicant do not prove to the requisite legal standard that the applicant's financial situation is such that it is objectively impossible for it to provide the bank guarantee required.

39.39

Firstly, with regard to the argument concerning the applicant's trading losses during the previous financial years, it must be stated that the balance sheets produced by the applicant show a general improvement in its financial situation during the last three years. Thus, during the financial year 2001, the applicant improved its results, bringing the deficit of EUR 13.467 million at the end of the financial year 2000 down to a deficit of approximately EUR 8 million at the end of the following financial year. During the financial year 2002, it achieved a positive net result of EUR 154 376. Those figures are accompanied by a 25% increase in turnover during the financial year 2002, which rose from EUR 158.047 million to EUR 198.936 million.

40.40

It must also be stated that the report on the management of the balance sheet at 31 December 2002, which is an integral part of the balance sheet for the financial year 2002, notes an improvement in the financial situation of the sector in which the applicant operates. According to that report, the positive trend in 2002 is confirmed in both the private and public building sector, which resulted in sustained demand for reinforced concrete throughout the year with prices which, during the second half of the year, showed a sudden significant increase. In the field of special steels, which, in 2002, represented approximately 20% of the applicant's total sales, the rolling plant recorded generally optimum values during the year. The report also shows that, during the financial year 2002, EUR 2.540 million was invested and that further investment is planned for the financial year 2003.

41.41

So far as concerns the first six months of 2003, the report on the management of the balance sheet at 31 December 2002 shows a volume of production which justifies, in the field of special steels, the applicant's decision to focus production on special bars, leading to further investment in that field. The report also shows that, whereas, in the field of special steels, in 2002 there was an increase in production of 47.4% on 2001, the applicant's company has already achieved a volume of 53 000 tonnes during the first five months of 2003, as against 73 000 for the whole of 2002.

42.42

It is apparent that the applicant's financial situation is continually improving and that its future prospects are positive.

43.43

Secondly, in so far as concerns its short-term debts to banks, these were also reduced during the financial year 2002. The balance sheet submitted shows that the debt was reduced by about EUR 6 million, because it was brought down from EUR 53.657 million to EUR 47.865 million at the end of 2002.

44.44

Thirdly, with regard to the argument that the applicant has no immediately realisable assets, since the only assets against which the Commission could move are plant and production line machinery, the judge hearing the application for interim measures considers that the applicant has not proved to the requisite legal standard that the latter could not be the subject of a lien for the purposes of providing the bank guarantee required. The balance sheet for the financial year 2002 shows that the value of those assets is assessed at EUR 34.112 million. Furthermore, as the applicant has stated on several occasions, those assets are free from mortgage and fixed or floating charge.

45.45

In reply to a written question put by the judge hearing the application for interim measures in that regard, the applicant has explained that, in connection with the financing of its usual activity, the banks have never agreed to grant it a loan in return for a lien on its plant and industrial machinery and that it is therefore even more difficult to envisage obtaining guarantees for the purpose of providing a bank guarantee for the payment of fines.

There is no material in the file enabling the judge hearing the application for interim measures to verify the accuracy of those claims which, furthermore, appear to be mere suppositions. The only information produced in that regard are the letters of 20 and 21 January and 7 May 2003, according to which two banks refuse to grant the guarantee requested. However, those letters, which are very brief, are drafted in general terms and therefore do not enable the Court to ascertain whether the applicant suggested to those banks a lien on the aforementioned plant and equipment.

47.47

In its application for interim measures, the applicant also points out that the plant and equipment in question are of little technological importance and commercial value.

48.48

However, the documents produced by the applicant show significant investment in plant and equipment during the financial year 2001. At 31 December 2000, the value of the plant and equipment, according to the balance sheets, was EUR 3.989 million, whereas, at 31 December, their value was EUR 34.337 million. That data therefore shows significant investment in plant and equipment during the financial year 2001, which leads the judge hearing the application for interim measures to conclude that the plant and equipment have a certain commercial value were they to be sold on the market.

49.49

Finally, in reply to a written question put by the judge hearing the application for interim measures, the applicant claims that, according to banking practice, for a loan of EUR 7 million, the banks would require a lien on the plant and equipment of between EUR 28 and 35 million.

50.50

Even if the credit institutions, in the present case, require a lien on assets valued at that amount, which has not been proved, the fact remains that the figures mentioned by the applicant do not exceed the value of the plant and industrial equipment it owns.

51.51

In the light of the foregoing, it is very unlikely that a bank will refuse to grant a bank guarantee of a value of about EUR 7 million in return for a lien on assets with a value of about EUR 34 million.

52.52

Finally, in so far as concerns the applicant's initial claim that AFLL is a shell company with no assets and that therefore it falls to the applicant alone to provide the Commission with the whole of the requisite bank guarantee, it should be pointed out that the applicant has not adduced any evidence to substantiate that claim. Accordingly, the applicant has not established that, as it claims, it had to ask the banks to provide a bank guarantee for an amount of EUR 7.175 million together with interest.

It is apparent from the foregoing observations that the applicant has clearly not established that its financial situation is such that it will be objectively impossible for it to provide the requisite bank guarantee.

54

As regards the question of whether providing the bank guarantee would lead the applicant to disappear from the market, it must be noted that, in its application for interim relief, the applicant merely claims that it will be objectively impossible for it to provide a bank guarantee and that the enforcement of the Decision would jeopardise its existence. Consequently, the applicant does not prove that providing the requisite bank guarantee would, in itself, lead to its disappearance from the market.

55

It follows from the above that the applicant has not succeeded in proving to the requisite legal standard that, if the obligation to provide the bank guarantee in question is not suspended, it will suffer serious and irreparable damage.

56

Since the applicant has not established the existence of exceptional circumstances, this application must be dismissed, without there being any need to ascertain whether the condition with regard to a prima facie case is satisfied.

On those grounds,

hereby orders:

The application for interim measures is dismissed.

Costs are reserved.

Luxembourg, 20 October 2003.

Registrar

1

Language of the case: Italian.