Important legal notice

61985C0226

Opinion of Mr Advocate General Vilaça delivered on 5 February 1987. - Dillinger Hüttenwerke AG v Commission of the European Communities. - Adjustment of steel quotas - Relationship with the rules for aids. - Case 226/85.

European Court reports 1987 Page 01621

Opinion of the Advocate-General

Mr President, Members of the Court, 1 . The applicant in these proceedings - Dillinger Huettenwerke AG, a German steel undertaking - seeks a declaration as to the nullity of the decision addressed to it by the Commission on 12 June 1985, refusing to apply to it Article 14A of Commission Decision No 234/84/ECSC of 31 January 1984, ( 1 ) which extended the system of monitoring and production quotas for certain products of undertakings in the steel industry .

A - 2 . Article 14A ( 1 ) and ( 2 ) of Decision No 234/84 provides that, in certain circumstances, adjustments of quotas may be granted to steel undertakings where, because of closures, the ratio in a category of products between the reference production on 1 October 1982 and the production potential has increased by at least 5% compared with what it was on 1 October 1982 or when the last quarterly adjustment was made .

3 . Paragraph 4 of Article 14A lays down the conditions under which an undertaking may benefit from an increase in quotas pursuant to that article . It may so benefit only if :

( i ) it has not increased its capacity since 1 July 1983;

( ii ) it has not, since 1 October 1982, carried out plant closures giving rise to a significant increase in its utilization rate; and

( iii ) its viability is assured without structural adjustment .

4 . A further requirement is that, during the 12 months preceding the quarter in question :

( i ) the undertaking did not receive aids authorized by the Commission with a view to covering operating losses; and

( ii ) it was not the subject of penalties in respect of the price rules, or else paid any fines due .

B - 5 . By letters of 23 March, 26 July and 16 October 1984 and 15 January and 16 April 1985, the applicant applied, pursuant to Article 14A of Decision No 234/84, for an adjustment of its quotas in category II for the quarters between the beginning of 1984 and the second quarter of 1985 inclusive .

6 . In its reply of 12 June 1985, the Commission set out the following considerations to justify its refusal to accede to the applicant' s requests :

Provided that the conditions laid down in Article 14A of Decision No 234/84 are satisfied, the Commission may grant certain additional quotas . However, a precondition therefor is that the undertaking in question must already have been restructured and, as a result, no longer be in need of aid .

The Commission has taken note of the applicant undertaking' s restructuring plan, on the basis of the communication from the Government of the Federal Republic of Germany of 30 January 1984 . The plan provides for the closure of production plant in 1985 and the grant of aid; accordingly, the applicant undertaking cannot be regarded as having already been restructured .

7 . The purpose of the communication from the German Government referred to by the Commission was, in particular, to obtain, under Commission Decision 83/392/ECSC of 29 June 1983 ( 2 ) on aids to the steel industry proposed to be granted by the German Government, definitive authorization from the Commission for the grant of certain aids to the applicant, for the purpose of financing its restructuring plan . The Commission gave a favourable opinion thereon on 7 May 1984 . The opinion took account of the fact that the plan simultaneously improved the products, and their surface quality, strength and dimensions, thus enabling the applicant to adjust to changes in demand, and that, moveover, the plan involved a decrease in production capacity for heavy plate of 360 000 tonnes a year . On 2 May 1985, the Commission gave authority for the aid to be granted to the applicant .

8 . The applicant attacks the decision in question on the basis of two submissions : infringement of Article 14A of Decision No 234/84 and breach of the duty to state the reasons on which the decision was based, as required by Article 15 of the ECSC Treaty . In fact, the two arguments are closely inter-connected, since they both relate to the reasons for the decision in the light of the conditions laid down by Article 14A .

9 . In essence, the applicant claims that, in adopting the contested decision refusing to adjust the quotas as requested, the Commission merely relied upon the fact that restructuring measures were planned and grants for that purpose had been applied for . In its view, that approach is improper in the light of the letter and the spirit of Article 14A ( 4 ) which specifically requires, as a precondition for the grant of additional quotas, that the viability of the undertaking should be assured even without structural adjustment . That provision is not therefore intended to exclude from its scope all undertakings which are being restructured, but only those for which restructuring is necessary to enable them subsequently, and particularly after the closure of plant, to regain viability without the need for aids .

10 . Even if it were conceded that the Commission implicitly accepted, in its decision, that the applicant' s viability could not be assured without structural adjustment, the decision would, in the applicant' s view, have to be regarded as inadequate, as regards the statement of the reasons for it, in so far as it was not based on a rigorous assessment of the applicant' s general financial situation .

11 . Had it carried out such an assessment, the Commission would, according to the applicant, have decided that there was no doubt as to its viability, in view of its strong position in the steel market and the positive results recorded since 1978 ( with the exception of 1983, a year in which the economic situation was particularly difficult ).

12 . The restructuring measures carried out by it - for the financing of which the Commission had authorized the grant of government aid - were not therefore intended, in the applicant' s view, to re-establish its viability but rather to consolidate it and to strengthen its competitiveness by means of concentration on quality products and modernization through investments in up-to-date technology .

13 . Moreover, such investments would not give rise to plant closures, but rather to modernization or conversion of plant to facilitate the manufacture of products not subject to quotas . This is illustrated by the fact that the applicant engaged 500 new workers between 1980 and the end of 1985 .

14 . In short, the applicant considers that, as was admitted by Commission officials and even by a member of the Commission itself, its viability was assured without the need for structural adjustment, its plant being "among the most competitive in the Community ".

C - 15 . The Commission relies, in the first place, upon the purpose of Article 14A : in its view, in certain circumstances that article allows compensation in the form of additional quotas to be granted to undertakings which do not need restructuring, in other words, which do not need to carry out closures, in order to become competitive and which, therefore, receive no aid or additional quotas under Article 14B of Decision No 234/84 .

16 . It was that very fact that the Commission sought to emphasize when, in the statement of the reasons on which the contested decision was based, it used the same expression as that used in the preamble to Decision No 2177/83/ECSC ( which preceded Decision No 234/84 ), in relation to Article 14A thereof (" undertakings which have already been restructured and hence no longer receive aid "). That form of words therefore has, in both cases, the same meaning as the reference to viability being assured without structural adjustment .

17 . Moreover, in the same way, the Commission draws attention to the relationship between the quota system and the rules for aids to the steel industry laid down in Commission Decision No 2320/81/ECSC of 7 August 1981 .

18 . That decision applies only to those undertakings which, inter alia, are "engaged in the implementation of a ... restructuring programme ... capable of restoring its competitiveness and of making it financially viable without aid under normal market conditions ".

19 . It was by virtue of that provision that on 2 May 1985 the Commission authorized the applicant to receive aid from the German Government in connection with the restructuring programme which it had submitted .

20 . The Commission gave authority for such aids under Article 2 of the rules for aids because, as stated in the letter of authorization, the conditions laid down in that provision were fulfilled, namely :

( i ) the undertaking had submitted a restructuring programme;

( ii ) that programme entailed an "irreversible reduction" of sheet production-capacity as a result of the dismantling of a furnace and the removal from service of a rolling mill for finished products;

( iii ) it also involved various investments in research and development projects and in the introduction of technological innovations, which would enable production quality to be improved and innovations to be made regarding the type of products manufactured;

( iv ) Implementation of the programme would contribute to creating "a strong probability that, under normal market conditions, Dillinger Huettenwerke AG could regain its financial viability by 1986 without additional aid ".

28 . Nevertheless, the Commission requested that the half-yearly reports to be given to it should include "information as to the progress achieved by Dillinger Huettenwerke AG towards re-establishing financial viability", it being empowered to require payment of the aid to cease or to impose additional obligations regarding restructuring of the undertaking if the half-yearly reports were to raise "doubts as to the restoration of the undertaking' s viability by the end of 1985 ".

29 . In other words, the Commission regarded the applicant as an undertaking which required restructuring in order to become viable again, and it was exclusively for that reason that it had authorized the financial aid needed by the company to implement its restructuring programme .

30 . In transposing those conclusions to the sphere of application of Article 14A of Decision No 234/84, and thus in verifying whether the conditions laid down therein were fulfilled, the Commission did no more than demonstrate the close logical relationship between the rules for aids and the quota system, already upheld by the Court .

31 . In its rejoinder, the Commission further explains that it regards the word "viability", used in relation to the rules for aids and to Article 14A, as a technical term, for the appraisal of which it used a quantitative method whose results, in the applicant' s case, did not appear in the contested decision for reasons of convenience, but of which the criteria and basic assumptions are published in the 12th, 13th and 14th reports on competition policy, with the result that the applicant cannot be unaware of them .

32 . Thus, in considering the restoration of viability, the Commission applies identical criteria to all undertakings, with a view to ensuring, in the context of the market prospects indicated by the "General objectives", that they are capable of achieving the necessary margins to cover all their production costs, including depreciation, financial charges and a minimum return on capital and reserves .

33 . In that regard, the Commission states that its appraisal is based not on past results obtained in a market regulated by the public authorities ( quotas, price regulation, import restrictions ) but rather on the results which undertakings will foreseeably be capable of achieving in a free market, and it was reasonable to expect that such a market might re-establish itself by 1986 .

34 . In that connection, it is interesting to note that the Commission fixed a threshold of 3.5% for the minimum return on capital and reserves in 1986 as an essential criterion for recognizing viability without the need for restructuring .

35 . It was on the basis of those criteria that the Commission, relying upon the particulars furnished by the applicant in its restructuring programme and in the financial questionnaire, made the calculations necessary to assess the viability of Dillinger Huettenwerke AG as from 1986, for the purpose of deciding whether or not to authorize the aid applied for .

36 . The study carried out provided grounds for the view that, having regard to the investment plans and the envisaged aids, the applicant' s viability for 1986 could be regarded as "on the borderline", since its results were not sufficient to enable a return on capital and reserves of 3.5% to be paid ( DM 21.8 million instead of DM 24 million ).

37 . Moreover, its results would show a deficit of DM 43.2 million if the applicant did not proceed with the restructuring measures, and a surplus of only DM 15.8 million if the measures were implemented without any aid .

38 . It was the results of that calculation that the Commission transposed to the quota system, refusing to apply Article 14A to the applicant .

E - 39 . The Court has, as we have seen, already upheld the lawfulness of this combined interpretation of the provisions governing the two systems of rules, regard being had to their common objectives .

40 . However, a number of specific difficulties arise in the present case .

41 . Naturally, the terminology used in the relevant provisions of each of the two systems does not coincide entirely .

42 . Article 14A ( 4 ) speaks of "viability" without structural adjustment; and Article 2 ( 1 ) of the rules for aids refers to programmes capable of restoring "competitiveness" and of making undertakings "financially viable" without aids .

43 . In the German version of those provisions, the terms used are "Lebensfaehigkeit" ( for "viability", or "viabilité" in the French text ) and "Rentabilitaet" ( for "financially viable", or "financièrement viables ").

44 . Similarly, the terms used in the Italian text are, respectively, "possa continuare la sua attivitá" and "rendere l' efficienza finanziaria dell' impresa ".

45 . However, it is significant that the English version of Article 2 of the rules for aids does not speak of "profitability" but instead uses the term "making it financially viable ".

46 . It is incumbent upon the institutions to interpret and apply the rules of Community law uniformly, without relying on individual language versions .

47 . However, that is only possible if objective criteria of interpretation are applied .

(*) Translated from the Portuguese.

(1) OJ L 29, 1.2.1984, p. 1.

(2) OJ L 227, 19.8.1983.

(3) Judgment of 15 January 1985 in Case 250/83 Finsider v Commission ((1985)) ECR 131, at p. 152; judgment of 15 October 1985, Joined Cases 211 and 212/83, 77 and 78/84 Krupp Stahl AG and Thyssen Stahl AG v Commission ((1985)) ECR 3409.

(4) Case 250/83, supra, paragraph 9.

(5) Joined Cases 211 and 212/83, 77 and 78/84, supra, paragraph 34.

(6) Judgment of 28 March 1985 in Case 100/84 Commission v United Kingdom ((1985)) ECR 1169, paragraph 17.

(7) Cf. judgment of 28 October 1981, in Joined Cases 275/80 and 24/81 Krupp v Commission ((1981)) ECR 2489, at pp. 2512 and 2513.