OPINION OF MR ADVOCATE GENERAL LAGRANGE (1)

Summary

I — Facts

II — Admissibility

Application No 2/57

Application No 15/57 (Objection of illegality)

III — Consideration of the substance of Application No 2/57

Misuse of powers as a result of rules adversely affecting pig-iron producers as compared with steel producers

Misuse of powers as a result of the application of a uniform equalization contribution to scrap purchases which are not comparable

IV — Consideration of the substance of Application No 15/57

Infringement of Article 29 of the Convention

Infringement of the ‘principle of free competition’

V — Final opinion

Mr President,

Members of the Court,

The applicant company operates blast furnaces at Chasse (Isère) south of Lyon, in the vicinity of the Saint-Chamond and Saint-Etienne coalfields, in which it produces haematite pig-iron which it sells almost exclusively as open hearth pig-iron for the steel mills.

The raw materials which it uses are (i) coke from the neighbouring district of Saint Etienne; (ii) haematite iron-ore, of a low phosphorous content, coming mainly from desposits of which it is the concessionnaire in the Pyrenees Orientales and Algeria; and (iii) ferrous scrap which it obtains in the Lyon district, where there is a large market in scrap. It should be noted that ferrous scrap which is used in order to ‘enrich the charge’ is in fact one of the most important of the raw materials used by the company, its specific input having been, for example, 454 kg in 1956.

The Compagnie des Hauts Fourneaux de Chasse which, accordingly, does not use imported scrap, felt compelled to refuse to comply with the financial arrangement for equalization established by the undertakings in order to offset the price of imported scrap. It became subject to the arrangement only when this became compulsory under Decisions Nos 22/54 and 14/55, which were adopted in implementation of Article 53 (b) of the Treaty.

After that, it made representations to the High Authority with a view to avoiding the equalization levy or at least negotiating special arrangements. During these negotiations it made part payments only and, finally, it received notification of a decision taken on 12 December 1956 under Article 92 and made enforceable for the recovery of sums due as equalization levy in implementation of the aforesaid Decisions Nos 22/54 and 14/55. The total of the sums due under the decision amounts to FF 84582316.

The Compagnie des Hauts Fourneaux de Chasse lodged an application, No 15/57, against this decision in which it sought its annulment solely on the ground of the illegality of the two basic general decisions to which I have just referred: Nos 22/54 and 14/55.

Furthermore, in another application, No 2/57, it contested Decision No 2/57 (the fact that these figures are the same is a coincidence). It seeks the annulment of Decision No 2/57 in its entirety on the ground of misuse of powers affecting it but in contrast to those making the other applications, it is, in fact, impugning those provisions of that decision which are repeated from the initial decisions, and which are concerned merely with the equalization of prices of imported scrap and those of domestic scrap. It contests the provisions relating to pig-iron/ scrap equalization and the new provisions of Decision No 2/57 which are contested in the other applications only in that they constitute inadequate alleviations of the effects of equalization itself which, in its view, is illegal and vitiated by misuse of powers affecting it.

Accordingly, two issuses arise as to admissibility.

The first, concerning Application No 2/57, is whether the applicant has a right of action against those provisions of Decision No 2/57 which are merely repeated from previous decisions, since they have not been the subject of an application and the periods for bringing them have expired.

The second, concerning Application No 15/57, is whether and to what extent in lodging an application for recovery against an individual decision the applicant can rely on the illegality of the basic general decisions.

The first question will not detain us long. The High Authority did not restrict itself, as it could have done, to supplementing the previous decision or decisions by new provisions abolishing pig-iron/scrap equalization at a future date and changing the arrangments for sharing the cost of equalization. It incorporated in its decision all the previous provisions which had not been amended and expressly revoked Decision No 14/55 or rather (which amounts to the same thing) provided that the decision ‘shall cease to apply as from 1 February 1957’. In view of the fact that, as I had occasion to state in the comments I made on Decision No 2/57 this morning, that decision is complete in itself, I can find no ground in law for declaring that an undertaking's application is barred on the ground that the previous decisions were not contested in time.

The second question is a more important one. It is whether, in support of an action for annulment brought by undertakings under the second paragraph of Article 33 against ‘decisions … concerning them which are individual in character’, an applicant can claim that a general decision which formed the basis of the individual decision which is impugned is illegal.

The High Authority relies mainly, by arguing in reverse, on the provisions of Article 36, which expressly provide for the objection of illegality in the case of appeals against decisions imposing fines or periodical penalty payments and contends that this objection is inadmissible in other cases of individual decisions. It contends, in the alternative, that even if an objection as to admissibility were entertained, this could in any event not be based on any ground except that on which an undertaking can rely in the case of a direct action against a general decision, that is to say, misuse of powers affecting it.

In my opinion, the objection of illegality must be accepted as admissible, and unconditionally admissible, that is to say, with the right to rely on all the grounds of illegality set out in the first paragraph of Article 33. Under the provisions of the second paragraph of Article 33, ‘Undertakings or the associations referred to in Article 48 may, under the same conditions, institute proceedings against decisions or recommendations concerning them which are individual in character…’. The words ‘under the same conditions’ undoubtedly refer to the conditions under which the Member States and the Council may, on their part, bring actions for annulment pursuant to the first paragraph. It is clear therefore that, in respect of ‘decisions … concerning them which are individual in character’ undertakings and associations of undertakings may rely on the four grounds for annulment referred to in the first paragraph. In any event, I cannot see why a review of the legality of a basic decision should be confined to the single ground of misuse of powers once it is accepted that the objection of illegality may be raised in support of proceedings against a decision in an individual case.

Thus, the real question is in my view whether or not the objection of illegality is admissible.

First of all, what is the position in this respect in the Member States of the Community?

In three of them, France, Belgium and Italy, this objection is generally allowed since it is considered to fall within the field normally covered by proceedings for annulment. This means that, in these three countries, regulations issued by the executive power are, as far as the right of action is concerned, considered from the standpoint of form, that is to say, as being administrative acts capable of being annulled if they are contrary to the law. Since they can be the subject of a direct action for annulment there is, in principle, no reason why their legality should not also be reviewed when they are the subject of an individual application. The advantage is that an objection of illegality can be raised at any time even after the period for contesting the regulation or general decision has expired. On the other hand, if the applicaiton is successful, only the individual decision is annulled, which avoids the serious consequences of an annulment of the regulation itself, pronounced erga omnes, with retroactive effect.

As far as France is concerned I refer to two judgments of the Conseil d'État, among many others: Abbé Barthélémy,9 July 1926, Recueil page 713; Marcin-Kowsky,28 November 1951, Recueil page 548.

These judgments are interesting because they begin by dismissing claims for the annulment of the regulation because they were submitted out of time and, immediately afterwards, give a ruling on the legality of the regulation in the context of claims brought against an individual implementing decision. However, case-law accepts that the legality of the regulation can be impugned only in so far as the provisions of the regulation which formed the basis of the implementing measure are concerned Dame Denayer,18. 2. 1949, Recueil 80 and Sirey, 1949, 3.40).

In the other three countries of the Community, Germany, the Netherlands and Luxembourg, as the Court will be aware, greater emphasis is laid on the test of subject-matter, under which a regulation is treated as secondary legislation of the same nature as a law. Nevertheless the subordination of the regulation to the law remains a sure legal principle and while the first concept raises doubts concerning the admission of direct actions for the annulment of regulations, the second makes it easier for an objection of illegality to be raised. In criminal law this objection is very widely admitted. It is also allowed under administrative law. The main difficulties in this latter field lie above all in the determination of the court with jurisdiction to rule on the question of legality; this is especially true in France, a country where the principle of the separation of powers is very strictly applied and where, in consequence, a reference to the administrative court for a preliminary ruling often prevails over the principle that the court dealing with the substance must deal with the objection, but such considerations do not arise when, as in the present case, the same court has jurisdiction to deal with both.

Are there any particular reasons why a different solution should be adopted for the application of the Treaty? I think not. On the contrary, Article 41, under which, without any restriction regarding the nature of the grounds which may be adduced or the nature of the decision in question, the Court has jurisdiction to give preliminary rulings on the validity of acts of the High Authority where such validity is in issue in proceedings brought before a national court or tribunal, constitutes a further argument against any restrictions, since there can be nothing to justify a more restrictive attitude towards undertakings which have direct access to the Court than towards third parties who, from time to time, require to have a ruling on an issue affecting the legality of a decision of the High Authority.

As for the argument based on the provisions of Article 36 concerning sanctions, to which the High Authority attaches importance, it has no relevance here. Argument by reasoning in reverse or an argument by analogy? As, with great impartiality, learned counsel for the High Authority has explained, one can choose either. My only comment is that when it was thought necessary to enshrine in Article 36 a specific reference to contesting the legality of a measure in relation to appeals against pecuniary sanctions and periodic penalty payments, it must very likely have been for the removal of all doubt. Although it is true, as I have stated, that the objection of illegality is generally allowed in criminal matters, because criminal law is essentially enacted law, doubts might continue to arise from the fact that the pecuniary sanctions and periodic penalty payments provided for under the Treaty are administrative, not penal, sanctions and that Article 36, which is the lex specialis concerning them, gives rise in this context to proceedings in which the Court has so-called ‘unlimited jurisdiction’. It seemed better to define their limits by stating expressly that, in this case too, the court dealing with the substance of the dispute has — without any restriction — jurisdiction on the question of legality. On the other hand, Article 33 is concerned with proceedings for annulment and there was no need to say more.

There is, moreover, no need to regard a restrictive answer as especially shocking in the circumstances of this case, where the individual decision is a decision declaring that a contravention has been committed and seeking recovery of a debt, since the powers of the Court and the rights of those concerned were different according to whether or not a penalty was attached to the decision. This would be the case, in particular, on every occasion when a decision was for the recovery of sums due in payment of the levy, that is to say, in a quasi-fiscal matter without the addition of any fine. I am aware of no case where a fiscal court has less jurisdiction with regard to the point of law to be settled when the tax has not been accompanied by a fine than when it has. Finally, as the applicant company has pointed out, the principle which I am propounding was expressly enshrined in the new Treaties (EEC Treaty, Article 184; EAEC Treaty, Article 156).

The foregoing are the grounds on which I think the Court should unhesitatingly declare that Application No 15/57 is admissible and that the Compagnie des Hauts Fourneaux de Chasse may, under the conditions laid down in the first paragraph of Article 33, contest the legality of the general decisions which formed the basis of the decision impugned by that application.

I now come to the substance of the case. I shall begin with Application No 2/57, which relies exclusively on the ground of misuse of powers, and then, going on to Application No 15/57, in which the applicant <span class="italic">also</span> relies on grounds of infringement of the Treaty (as in my view it is entitled to do) I shall consider to what extent those grounds call for special comment.

The Compagnie des Hauts Fourneaux de Chasse, then, is complaining that, arising from the equalization of imported ferrous scrap and the detailed rules for implementation of the said equalization, the High Authority was guilty of a misuse or powers affecting it. According to the applicant, such misuse takes, in essence, two forms. The first is the fact that a set of rules ‘victimizes’ pig-iron producers as compared with steel producers and therefore constitutes discrimination at the expense of the former.

The second is the fact that the detailed rules for implementation of equalization did not, as between light scrap for blast furnaces and heavy scrap for steel mills, apply the difference of treatment required by the dissimilarity between these two categories of raw material, which are fundamentally different both as regards their position on the market and their use in the industry.

In support of these complaints Chasse relies on a number of arguments which may be summarized as follows.

1.As regards <span class="italic">the misuse of powers at the expense of pig-iron producers as compared with steel producers</span>, the applicant contends, first, that the artificial maintenance of the price of ferrous scrap at a relatively low level encourages steel producers to use less pig-iron and to increase their consumption of scrap. Secondly, it maintains that the imposition of the equalization levy on the tonnages of scrap-iron purchased by pig-iron producers substantially enhances the production costs of their products and appreciably reduces their competitiveness as compared with pig-iron imported from abroad.

Finally, it claims that pig-iron producers are at a disadvantage on the market in light scrap as compared with certain categories of ferrous scrap consumers which are not obliged to pay the equalization contribution.

2.As regards the <span class="italic">misuse of powers by reason of the application of a uniform equalization contribution on categories of scrap which are not comparable</span>, there is misuse of powers affecting not only <span class="italic">all consumers of light scrap</span> but, more particularly, <span class="italic">remotely situated blast furnaces which do not have their own arisings</span>, and, above all, the <span class="italic">Compagnie des Hauts Fourneaux de Chasse</span> whose position called for the adoption of special measures. There is misuse of power <span class="italic">in respect of all consumers of light scrap because of the application to this category of raw material of the same equalization rate as that provided for in the case of purchases of heavy scrap, which is always more expensive, is used for a totally different purpose and is in short supply whereas light scrap is not.</span>

In respect more particularly of remotely situated blast furnaces, there is misuse of powers in that they are made subject to the same equalization rate as those operated by group undertakings which rely on their own steel arisings which are not subject to equalization.

Finally and above all, there is misuse of powers <span class="italic">in the case of the Compagnie des Hauts Fourneaux de Chasse</span> in that the High Authority failed to take account of the undertaking's position on the market, which called for the adoption of special measures in its case, including exemption for the equalization levy.

Chasse is in a special position:

(a)from the <span class="italic">geographical</span> point of view because it is situated at a distance from ‘import channels’;

(b)from the <span class="italic">technical</span> point of view because Chasse produces haematite pig-iron and uses scrap only to enrich the charge of the blast furnace; and

(c)finally, from the <span class="italic">commercial</span> point of view because there are available to Chasse, on site, turnings and sheet-scrap supplied to it at ‘low cost’ by ‘regular and long-standing’ suppliers.

Such statements impose on the Court a task of some difficulty in sifting the facts. Accordingly, it is to the information supplied at the preparatory inquiry, especially the answers submitted by the parties in reply to the order of 26 November 1957, that reference must be made in order to appraise the substance of the complaints which have thus been made.

Let us turn first to the misuse of powers which is alleged to have been committed at the expense of pig-iron producers who were arbitrarily placed at a disadvantage as compared with steel producers.

The Court will recall that the arguments which have taken place before it on the subject of the equalization schemes introduced by the High Authority have revealed the High Authority's constant concern to cope with an inherent shortage of scrap by a policy designed to encourage the means of producing pig-iron which, in its view, is essential if the expansion in steel production is to be maintained. This concern is reflected in every public expression of the High Authority's views, such as provisional programmes, general objectives, annual reports on the work of the Community and its general opinion on the channelling of investments. Its statements before the Common Assembly invariably refer to the same theme (for example, the speech delivered by Mr President Mayer on 8 May 1956).

But this concern does not find expression in programmes and speeches alone. Thus, since the beginning of 1955, the High Authority has applied the financial arrangement of the equalization of imported ferrous scrap to such purpose that undertakings which substitute pig-iron for scrap in the preparation of steel in open-hearth furnaces are relieved of some of the financial burden imposed by equalization. This is what was called ‘pig-iron/scrap consumption’, which is a formula built into the equalization machinery designed to offset the additional cost arising from the substitution of pig-iron for scrap in the cost of production of steel (Decisions Nos 14/55 and 26/55). The High Authority reported the actual results of this scheme: while, in its view, they failed to offer sufficient incentive to economize in the use of scrap, they were nevertheless appreciable since compensation covered more than 1600000 metric tons or 21 % of ferrous scrap imports.

Anxious to enhance the incentive to save scrap, the High Authority adjusted its financial arrangement by Decision No 2/57, the essential feature of which, as the Court will be aware, is to vary the financial burden of equalization according to the <span class="italic">quantities</span> of scrap bought and the <span class="italic">quality of the methods of using it.</span> In this latter context, every reduction in the specific input of scrap, <span class="italic">in all production plants and processes using this material</span>, attracts reliefs which, as far as the proportion to which the supplementary rate applies is concerned, may suffice to wipe out in its entirety that proportion of the contribution.

For example, in 1956, the Compagnie des Hauts Fourneaux de Chasse reduced its specific input of scrap by about 30 % and will be wholly exempted from the levying of the supplementary rate (because the rebate on the said rate is five times the percentage reduction in the specific input) if only it makes an appropriate choice of its reference period.

This system of ‘rebates’ is certainly such as to benefit, more particularly, pig-iron producers and it does so in two ways. On the one hand, the substitution of coke and ores which they are in a position to effect in the blast furnaces will secure for them the direct benefit of the refunds on the contributions which are due from them in their capacity as consumers of scrap; on the other hand, the effect of substituting pig-iron for scrap in openhearth steel milles will increase their sales of open-hearth pig-iron and of spiegeleisen.

I cannot therefore see in what way the fact that the High Authority introduced a financial arrangement to regulate the market in scrap can <span class="italic">in itself</span> and on this ground alone constitute a misuse of powers in respect of pig-iron producers who as scrap consumers have in any case a direct interest in its being regulated.

Furthermore, study of the actual situation seems to me to contradict the allegations on which the applicant company rests its complaint.

Thus, it cannot reasonably be stated that the prices of ferrous scrap were artificially maintained at so low a level that this constituted an incentive for steel producers to make less use of pig-iron. As was recently said at the Bar during argument which the Court will no doubt recollect, <span class="italic">the rate of increase in the price of ferrous scrap</span>, from 1954 to 1957, is considerably higher than that of pig-iron and of steel. In France, for example, it is not disputed that, during those four years, the increase in the price of scrap was as much as 100 % whereas the prices of pigirons and steels increased, generally speaking, during the same period of time by, at most, between 15 and 20 %. Finally, the ration between the price of ferrous scrap and the price of haematite open-hearth pig-iron (the main product of the Compagnie de Chasse) went up from 0.50 to 0.75 with the result that, to repeat words which were used before this Court, ‘the price to the consumer of ferrous scrap is well above the level at which scrap becomes dearer than pig-iron’. These statements are a mere summary of the volume of the statistical information which appears in the public reports and statistical bulletins issued by the Community (for price trends in pig-iron and scrap, reference may in particular be made to <span class="italic">Informations Statistiques</span>, September to October 1957, p. 343 <span class="italic">et seq.).</span> They also reflect the information produced by Chasse regarding the trend of prices in the Lyon district of certain types of ferrous scrap — a matter which I shall come back to in a moment.

There is, therefore, no certainty that the encouragement to steel producers to use more ferrous scrap was due to the ‘artificially low level’ of the price of this material as a result of equalization. That encouragement is directly connected with the very marked surge in economic activity experienced by the steel industry of the Community since the middle of 1954, circumstances in which, as the Court will be aware, recourse to scrap is technically the simplest method of coping quickly with excess demand, and it is in this sense that it may be said that, in restoring equilibrium to the market, equalization had <span class="italic">in itself</span> contributed to the growth in the consumption of ferrous scrap. Account must also be taken of the development of fine and special steels, the most intensive production of which is carried out at electric furnaces.

Nor has it been established that the financial burden imposed on scrap consumers for equalization of imported scrap places the pig-iron producers of the Community at a competitive disadvantage in relation to the pig-iron producers of third countries. Apart from certain provisions which have been adopted in this connexion, including those for the purpose of ensuring that only undertakings replacing scrap <span class="italic">with pig-iron produced in the Community</span> benefit from pigiron /scrap compensation (second paragraph of Article 4 of Decision No 26/55), it is beyond dispute that pig-iron imports from third countries have remained at an extremely low level since the coming into force of the financial arrangement even during the period of high economic activity. In 1956, for example, pig-iron imports reached 576000 metric tons; they were almost equalled by exports, which amounted to 410000 metric tons. These figures are to be compared with the total pig-iron output of the Community which, in that year, reached 43547000 metric tons (the High Authority's answer to the questions set out in the order of 26 November 1957, page 9). Finally, it seems to me inconceivable that the exemption from the equalization levy of certain categories of ferrous scrap consumers with whom the Compagnie des Hauts Fourneaux de Chasse competes <span class="italic">as purchasers</span> can constitute a misuse of powers to the advantage of those categories. Apart from the fact that they do not fall within the jurisdiction of the Community, which would make it even harder to explain why the High Authority should show any particular concern for them, it appears that all the undertakings in the Community producing open-hearth pig-iron are, like the Compagnie de Chasse, obliged to pay the contribution. And if ferro-alloy undertakings other than those falling within the jurisdiction of the Community are by right exempt from the payment of the contribution for their scrap purchases, how can this involve a misuse of powers at the expense of Chasse, since there cannot be any possibility of competition between them <span class="italic">at the stage of sales</span> as their output is used for different purposes.

In my view therefore, the first part of the submission on misuse of powers cannot be upheld.

The second part of the submission of misuse of powers relied upon by the Compagnie de Chasse is, as we have seen, based on the application of a uniform equalization rate to two ‘categories’ of ferrous scrap which, because of commercial and technological differences, ought to be regarded as two products which bear no comparison with each other and, in consequence, treated differently.

In fact, therefore, it is a case of purely objective discrimination, arising from the application of uniform rules to situations which cannot be compared with each other, which the Compagnie de Chasse regards as a misuse of powers affecting it. No doubt the applicant is in so doing referring by implication to the argument that a serious lack of care in an assessment of the facts can constitute both discriminatory behaviour contrary to Article 4(b) of the Treaty and a misuse of powers affecting the undertaking (or the category of undertakings) which has to suffer this action.

We must therefore consider whether the details supplied by the parties during the preparatory inquiry are such as to establish that equalization as it was applied in the case of the Compagnie de Chasse was discriminatory, bearing in mind the particular situation of this undertaking both from the geographical and from the technical and commercial points of view.

In my opinion these details prove that there are no differences between scrap used in blast furnaces and that used in steel mills which make it impossible to compare these categories of the raw material <span class="italic">from the standpoint of an equalization system such as that which has been established since April 1954.</span> In my view, they also demonstrate that the applicant company does not occupy a position in the category of pig-iron producers the nature of which is such as to justify the application of special measures to that company.

In the first place, as regards the <span class="italic">comparability of the use to which the material is put</span>

the information supplied by the parties and, in particular, that appearing as an annex to the answers submitted by the Compagnie de Chasse in conformity with the order of 26 November 1957 demonstrate that, so far as most of its scrap supplies are concerned, the applicant is in competition with the steel mills and draws upon a category of the raw material, the use of which is common to them both.

In fact, only No 59 bales and sheet scrap with a high non-ferrous metal content are regularly rejected by the steel mills. But it appears that the Chasse blast furnaces are, for their part, comparatively poor consumers of this material, as is shown by the statistics of their purchases for the period 1954 to 1956.

It is clear from these figures that the applicant company's scrap supplies consist, as regards 80 % of the tonnage purchased, of turnings of very pure scrap which at the same time represent a quarter of the purchases made by the steel mills.

In 1956, according to its own statement, the Compagnie de Chasse consumed a little over 33600 metric tons of scrap. In the same year it purchased in the Lyon district close on 27000 metric tons of No 41/42 turnings, although their price was very high, and less than 7000 metric tons of No 58/59 bales, known as ‘bales for blast furnaces’ (Reply, p. 3, and Annex III to the answers from from Chasse to the questions set out in the order of 26. 11. 1957).

It is true that the proportion of turnings used, on the one hand, in the steel mills and, on the other, in blast furnaces, was very different — between 20 and 25 % in the first case and 80 % in the second; nevertheless the consumption of turnings per ton of steel is similar to that required for production of a ton of pig-iron, because of the magnitude of scrap charging in open-hearth and electric furnaces, in which the consumption of ferrous scrap reaches 1000 kg per metric ton of steel. It is accordingly clear that, both from the technological and from the quantitative standpoint, the use of turning in the steel mills is on a scale which compares with that of the chargings of turnings in the blast furnace.

Furthermore, the information supplied by Chasse indicates that steel mills also use ‘No 52 bales’, classified as ‘light scrap’ under the official nomenclature of the High Authority. On the other hand it is common ground that blast furnaces operated by integrated steel undertakings consume large quantities of their own steel arisings.

For 80 % of its supplies the Compagnie de Chasse uses a type of ferrous scrap which it has to purchase in competition with steel works because the production of the very pure pig-iron, for the same reason as that of open-hearth steel, requires the use of high quality scrap. On this subject I should like to quote Ferry and Chatel ‘L'Acier’, Paris, 1953, at page 46:

‘Scrap, which is 90 or 95 % by weight pure iron, is the basic raw material for openhearth steel. It is also used to enrich the charge in the manufacture of pig-iron. Quality plays a very important part in the case of scrap. So as not to risk producing pig-iron or steel which is unfit for use, only the purest scrap must be used’.

I come now to consider the comparability from the standpoint of price, of the ferrous scrap used by the Compagnie de Chasse and that bought by the steel mills.

The documents supplied by the applicant inform us that the price of No 41/42 turnings, a category which, as we have seen, represents 80 % of the company's purchases, increased, in the Lyon district, by nearly 150 % between April 1954 and December 1956. Going from FF 5000 to 13500 per metric ton, these turnings had, just before the entry into force of Decision No 2/57 and for some time previously, almost reached the level of prices for the basic category of socalled pure scrap (classified as No 11 in the Nomenclature) which was then fetching FF 14000 per metric ton. This shows that differences in packaging which, at a time of low economic activity, create price differences such as those which appeared in Decision No 28/53 on the fixing of maximum prices for scrap do not, at a time of average or high economic activity, prevent comparative levelling out of prices of the various kinds.

It is, therefore, impossible to regard the scrap used by the applicant and that bought by the steel mills as being incapable of comparison with each other, whether from the point of view of price or the use to which it is put. In my view, it is a clearly established fact that these two types of scrap have ‘much in common’.

Let us now consider the position of the Compagnie de Chasse on the scrap market from the point of view of competitive purchasing.

Once again, it is clear from the details supplied by the applicant itself (especially the information given by its ‘regular and longstanding’ supplier No 1) that steel turnings salvaged in the Lyon district are perfectly capable of being transported. We are in fact told that ‘exports’ of scrap from the district amount to ‘tens of thousands of metric tons each year’ and that, in the consignments, turnings represent between 20 and 25 % of the purchases made by the steel mills.

Here we find the steel industry of the Centre-Midi, a traditional customer of Chasse in spiegeleisen and open-hearth haematite pig-iron and a competitor of Chasse on the turnings market in the Lyon district. It is no doubt the huge demand from the steel mills of the Centre-Midi which explains the rise in the price of steel turnings in that district during the period under review. The Court will remember that it was for this reason that, if the information supplied at the Bar during the first series of cases is correct, the quantity of turnings purchased by the steel mills is of the order of 150000 metric tons in the case of an output of fine and special steels of the order of 750000 metric tons per year. It is quite clear that this demand constitutes powerful competition for Chasse on its own ground, but this position did not, at least after the recovery in the summer of 1954, prevent the normal development of the applicant's sales of pig-iron to those steel mills.

Fourthly, the file indicates that the scrap purchased by the company is particularly sensitive to the economic climate. I recalled that, in the case of turnings, the increase was of the order of 150 % in the Lyon region between April 1954 and December 1956. During the same period of time, the price of category No 11 rose, in the same district, from FF 8000 to 14000 per metric ton, which is a difference of only 75 % In my view, this information is ample evidence that Chasse relies for the greater part of its supplies on a raw material which is particularly sensitive to the laws of supply and demand and that, in the Common Market, the Lyon district in no way constitutes an insulated economic unit which ought to be the subject of special measures.

At the same time this shows that, although at a distance from the ‘import channels’, the Lyon district and, in consequence, the applicant undertaking feel the effect of general fluctuations in the ferrous scrap market. It is true that the geographical situation of the Hauts Fourneaux de Chasse, in the vicinity of a large metallurgical centre, is such as to enable the company to obtain its scrap supplies in the immediate neighbourhood. In this respect the company is undeniably in a very different position from blast furnaces established in the vicinity of a seaport, which, as a result, normally rely on imported materials. But the High Authority makes allowance for these different conditions in providing supplies for the various consumption centres in the market; in order to avoid unnecessary movement of raw materials, some decisions provide that the benefit of equalization may, in certain districts of the Community, be conditional on the use of imported scrap (Article 5 (b) of Decision No 14/55 Article 11 (b) of Decision No 2/57).

Does this mean that equalization of imported scrap is of interest only to consumers of American scrap and benefits them alone?

To answer this in the affirmative would be to ignore the very idea of a Common Market and simply to deny any possibility of osmosis, in terms of prices, between the regions of that market. I think the facts which we have been considering show that there is no justification for that statement.

Nor, finally, in my opinion does the fact that for blast furnaces operated by integrated steel undertakings their own steel arisings are available and that these are exempt from the equalization levy mean that non-integrated blast furnaces are discriminated against in such a way as to constitute a misuse of powers affecting them on the part of the High Authority.

The equalization machinery is, as we have seen, the very prototype of a financial device for regulating the market by indirect intervention affecting the formation of prices. It is inconceivable therefore that is should be applied to the proportion of raw material which ‘merely circulates in the works’. Only supply and demand of the raw material on the market were capable of being involved in the working of this device for regulating prices.

Moreover and this is, in my view, important, I must remind the Court that nonintegrated blast furnaces such as Chasse consume about 80 % of turnings, for which they compete with steel mills and the quality of which is very much in demand. But inasmuch as integrated blast furnaces use scrap from arisings in their own steel mills and can, as far as the remainder are concerned, to a great extent use the lightest scrap, they refrain for this reason from exercising pressure on the market in turnings and pure scrap, which benefits isolated steel mills as much as non-integrated blast furnaces like Chasse.

It seems, therefore that we must recognize that it is not possible, either from the technical or from the economic and commercial viewpoint, to distinguish two categories of scrap which ought to have been subjected to different rules.

Before concluding I must express the view that the Compagnie des Hauts Fourneaux de Chasse has a definite interest in the prices of scrap being shielded from sudden increases arising out of the economic situation by a regulating device such as the equalization machinery.

The Court will be aware that the Compagnie de Chasse is, comparatively speaking, a very heavy scrap consumer. It has, in its reply stated that it uses this material ‘a vital element in the steel industry … only to enrich the charges of the blast furnace’, thus conveying an impression that, in its establishment, the use of scrap is merely ancillary. But in the same reply it explained to the Court that, until 1956, its specific input of scrap amounted to 454 kg per metric ton of pig-iron, a proportion which was/our and a half times greater than the average weighted specific input in the Community which Chasse has in receiving regular supplies of scrap.

This very heavy proportion of scrap consumption in the blast furnaces operated by the Compagnie de Chasse is certainly not a figment of the imagination. Chasse makes use of scrap to such a large extent because it has a clear financial interest in substituting it for ore which is made expensive because of the distance it has to travel. As it is situated near a large scrap recovery centre it has a very special interest in the price levels of its scrap supplies not being such as to necessitate excessive transfers of this raw material.

In conclusion I must state my view that neither of the two submissions of misuse of powers can be upheld. The principle of interdependence on which Decision No 2/57 is based seems to me to apply to Chasse as well as to the other undertakings of the Community which are consumers of scrap. I must now go on to consider the submissions of infringment of the Treaty made in Application No 15/57 against the general decisions which underlay the individual decision contested in that application. I should remind the Court that these general decisions are those which preceded Decision No 2/57 and that one of them was concerned with the earlier system of equalization and the other with the concomitant system of pig-iron/scrap equalization.

It will not take us long to consider this in view of the comments which I have just made on the first application.

Three submissions are made on the subject of legality. They are:

Infringement of Article 29 of the Convention. No further points were made during the oral procedure with regard to this submission. Reference on this matter to the reply (No 68, p. 34) shows that the applicant is not in fact charging the High Authority with not having used the powers it possesses under Article 29 of the Convention when it refrained from promulgating the safeguard arrangements provided for under that provison (which in any case would involve an action for failure to act) but, according to the applicant, with having ‘contravened the prohibitions laid down in Article 29’. These prohibitions are (I am still quoting):

‘(a) shifts in production levels and (b) difficulties created in meeting competition. The High Authority itself recognizes that the system prior to Decision No 2/57 resulted in a transfer from production of pig-iron to steel and at the same time made it impossible for the pig-iron industry to compete normally with the steel industry; moreover, the High Authority has not adopted any safeguard arrangement whatsoever with regard to the pig-iron industry.

Since the Convention makes it incumbent upon the High Authority to adopt the safeguard arrangements necessary to avoid certain difficulties which may arise from competition, how can the High Authority itself be allowed to create these difficulties through its own actions?’

The object of Article 29, which is no more than the application of the general principle laid down in Article 1 of the Convention, is to provide for certain safeguard arrangements for the purpose of enabling undertakings to adapt themselves to the new conditions created for them by the establishment of the Common Market. In intervening on the market, the High Authority certainly must not artificially create a situation which later obliges it to adopt safeguard arrangements which the normal course of competition itself would not have made necessary. But this is not the case, at least if the Court accepts that my earlier explanations are relevant.

Infringement of the ‘principle of free competition’. In this respect, the applicant refers to the infringement of a number of provisions of the Treaty laying down the principle of free competition (or to be precise, of normal competition), among them being Article 5 which reads: ‘The Community shall … ensure the establishment, maintenance and observance of normal competitive conditions…’ This principle is alleged to have been ignored ‘first by encouraging open-hearth steel mills and electric furnaces to consume scrap at the expense of pig-iron and, subsequently, by the imposition of a heavy charge which raised the cost price of pig-iron to a prohibitive level’.

We have already seen what weight must in reality be attached to this last statement: the price of pig-iron has increased by much less than that of ferrous scrap. As to making a comparison between the cost price of pig-iron and of scrap, respectively, in steel production, this, in view of the effect of the equalization machinery, is clearly a very difficult task. But the only question is whether this arrangement, in its original state

really undermined the conditions of competition, at least in so far as non-integrated pig-iron producers, such as Chasse, were concerned. As we have seen, it did not do so.

It is true that, as I had occasion to point out in the first series of cases in connexion with Application No 8/57 the High Authority might perhaps have made greater use of the discretion which it possessed (or ought to have possessed) for the purposes of determining the equalization price and fixed the price a little higher, consequently giving the price arrangement a rather more important role in slowing down the growing consumption of scrap; this is possible but I am not prepared to state that it is so. But we saw that a development of scrap consumption was essentially the result of the development of steel production owing to the economic situation and that it did not undermine the competitive capacity of pig-iron producers. This might have occurred in the long run if the High Authority had not adopted a whole series of increasingly vigorous measures to encourage increased use of pig-iron (measures moreover the effect of which to some extent makes itself felt only in the long run) but it cannot be said that, when they were adopted, Decisions Nos 22/54 and 14/55 (with which these proceedings are concerned) were in themselves such as to undermine the competitive capacity of pig-iron producers.

‘Secondly’, according to the applicant (Reply No 69) ‘this interference [with competition] is further aggravated by the application of a uniform equalization rate to heavy and light scrap’. But we have seen what importance should be attached to the distinction between heavy and light scrap: the interdependence of these various categories of scrap from the standpoint of supplying the Community in this raw material and of the undertakings which make use of it, including non-integrated producers of haematite pig-iron justifies a single equalization rate.

Finally, in the third section of its arguments, the applicant company claims that there has been a ‘disregard of the general principles of the Treaty, in particular Article 3, by the sacrifice of individual interests and the replacement of common interest by an alleged objective of general interest’.

Here, as the Court will realize, the applicant is in fact reiterating its general contention in the first application based on misuse of powers. It does not in my view deserve any special attention.

My opinion is that:

Both applications should be dismissed; and The Compagnie des Hauts Fourneaux de Chasse should pay the costs.

*

(<span class="note"> <a id="t-ECRCJ1957ENA.0100023301-E0002" href="#c-ECRCJ1957ENA.0100023301-E0002">1</a> </span>) Translated from the French.