Estel NV v Commission of the European Communities (270/82)

I —Legal context of the action and statement of the facts

II —Procedure and conclusions

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General the Court decided to open the oral procedure without any preparatory inquiry. It did however ask Estel and the Commission to give a written reply to a question before 15 September 1983. The replies given by the Commission, on 14 September 1983, and by Estel, on 15 September 1983, are set out below.By order of 13 July 1983 the Court decided to assign the case to the Fourth Chamber.The applicant claims that the Court should:1. Declare void, wholly or at least in part, the Commission's decision of 13 August 1982 addressed to Estel NV;In the alternative, reduce the fine imposed by the contested decision to nil or to such amount as the Court may think fit;2. Take such other measures as the Court may consider necessary;3. Order the Commission to pay the costs.The Commission contends that the Court should:1. Dismiss the application as unfounded;2. Order the applicant to pay the costs.

III —Contentions and arguments of the parties

In the first contention in its application the applicant maintains that it was wrong of the Commission to find by implication, that Estel had exceeded its production and delivery quotas by 10548 tonnes for products in Category la — relating to products used by the purchasers for the manufacture of a certain type of tube — and to have imposed upon it a fine for exceeding its quotas in that way. In determining the method of calculating adjustments to be made pursuant to Article 10 of Decision 1831/81 the Commission should instead have taken into consideration Estel's good faith. Estel points out that under the system of general Decision 2794/80 tubes and certain of their partly finished products — in particular wide and narrow strip intended for the manufacture of welded tubes — were not subject to any production quota. It was only later that it became clear that the development of the market did not justify such a general derogation for material intended for the manufacture of welded tubes.However, Estel suggested that Eurofer draw up special rules authorizing the quotas to be exceeded in the case of material supplied by Estel and other manufacturers to their own subsidiaries for the manufacture of small tubes, because there was substantial demand for such small tubes which were mainly used in the energy sector. Estel supplied almost exclusively its subsidiaries which were in direct competition with the manufacturers of weldless tubes, manufactured from material not subject to any quota system. Estel's suggestion was adopted by Eurofer, albeit in modified form, and the Commission adopted that Eurofer decision in Article 10 of Decision 1831/81.The problem, according to Estel, is how to “adjust the quota” in accordance with the aforementioned provision. The differing interpretations of the adjustment method, of Estel and Eurofer on the one hand, and the Commission on the other, did not appear until the end of 1981, which explains the excess production of 10548 tonnes. Estel took as the basis for calculating the amount of adjustment individual deliveries during the course of the third quarter and during the period of reference to manufacturers of small tubes whose demand was greater, while the Commission based its calculation on the whole of deliveries during the third quarter, and in adjusting the quota took as its starting point all deliveries during the reference period, including those of products for which demand had not increased.Estel claims that that method is contrary to the quota system because the Commission reasoned as if there existed a specific sub-quota for material intended for the manufacture of small tubes. By taking the entirety of deliveries as a starting point, the Commission failed to take account of the fact that the main purpose of Article 10 was to allow adjustments in individual cases only. According to that provision, a request must be submitted for a particular purchaser whose demand for small tubes has increased and it is necessary to show that the purchaser uses the strips for the manufacture of small tubes. There does not exist a “quota for tubes” but one quota for all products in Category la and undertakings may use each tonne of the production quota for any product or purchaser in the category concerned.In Estel's view, it follows from the foregoing that the only relevant question for the determination of whether the quota must be adjusted in accordance with Article 10 is whether Estel delivers a larger quantity to a particular customer than that same customer's share in the production quota. Where such is the case, the quota must be adjusted for the various customers, because the supply of material intended for the manufacture of small tubes is subject to special rules. The Commission's point of view appears to be illogical, particularly in cases where no request for adjustment was made for certain purchasers and where no evidence can be produced and inasmuch as the purchasers in question are nonetheless counted in order to limit the adjustment. The consequence of that is that, once a request is submitted, the proportion of the quota relating to tubes may only be used for the manufacture of tubes.According to the applicant, the difference between the methods of calculation in the present case resulted in the following figures (in tonnes):| Esteľs method of calculation | The Commission's method of calculation(a)Deliveries during the reference period: | 99087 | 115032(b)Reference production less 31%: | 68371 | 80507(c)Deliveries during the third quarter: | 145182 | 146770(d)Adjustment ((c) less (b)): | 76811 | 66263In Estel's method of calculation, (a) and (b) vary according to the number of purchasers included in (c) whose demand for small tubes increased, while in the Commission's method of calculation, (a) and (b) are constant.The applicant states that it did not know, and could not have known, until it received the telex message from the Commission on 1 December 1981, that the latter did not take account of individual purchasers in deciding whether or not to authorize an adjustment, but possibly applied another method of calculation. Moreover, it maintains that the Commission itself did not give a definitive opinion on the problem until about the middle of November 1981, as is shown by the exchanges of letters between Eurofer and the Commission. Therefore, although Estel and Eurofer had, by the beginning of 1982, accepted the Commission's point of view, in fixing the amount of the fine the latter ought to have taken into consideration the fact that Estel was able and entitled in good faith to apply its own method of calculation from the beginning of and during the course of the third quarter of 1981.Estel's second contention is that the disputed Commission decision was incorrect in so far as it found that Estel had exceeded by 18525 tonnes the production and delivery quota for products of Category Ia, in particular those delivered to re-rolling mills and imposed a fine upon Estel for doing so. These were deliveries to other iron and steel undertakings which had nothing to do with the “voluntary” quota system adopted by iron and steel undertakings within Eurofer. The Eurofer quotas for products of Category Ia are not identical for every undertaking to the corresponding quotas fixed by the Commission for the undertaking because, inter alia, Eurofer does not take into account deliveries to re-rolling mills, so that the Commission quotas have to be redistributed within Eurofer. Eurofer undertakings have to submit to its Secretariat, before each quarter, forecasts of their deliveries to re-rolling mills. The definitive adjustment of the Commission quotas is based on those forecasts, as is shown by the Commission's letter to Eurofer of 8 July 1982, annexed to the application. Therefore, those obligatory transactions are included in the definitive quotas fixed by the Commission.In accordance with that system, Estel states that it had to submit to Eurofer, before the third quarter of 1981, forecasts of its deliveries to re-rolling mills. However, since the system was new, Estel was not sure of the significance and the consequences of those forecasts and it did not know at that time that they were binding upon it and that the definitive production quota was fixed on the basis of the forecasts themselves. Therefore, after having submitted forecasts for deliveries of 50000 tonnes, Estel had agreed to supply further quantities to the re-rolling mills, with the result that it finally supplied to re-rolling mills 18525 tonnes more than forecast. It was unable to make up that difference by purchases or exchanges of quotas with other undertakings. The Commission's statement at the hearing of 4 June 1982, that it had nothing to with the Eurofer system was contradicted by the past and present collaboration between the Commission and Eurofer. Therefore, Estel states, if it had not ceded about 26000 tonnes of its quota under the Eurofer rules, it would barely have exceeded its production quota. Moreover, deliveries to re-rolling mills are very much a part of the restructuring of the iron and steel industry and do not disturb the market in any way.In its third contention, the applicant states that in fixing the amount of the fine, the Commission wrongly failed to take account of the fact that the excess over the production quotas for products of Category Ia and Ib was attributable to the problems specific to deliveries to the North American market. In view of that fact, the degree of culpability attaching to Estel and the seriousness of the offence would have justified a lesser fine. In early 1981 Estel contracted to supply to purchasers on the North American market approximately 500000 tonnes of products in Categories Ia and lb, half being intended for customers in the Great Lakes region, where deliveries arc only possible in summer and early autumn for climatic reasons. In making those contracts Estel was unable to wait to be notified of the definitive quotas for the third quarter of 1981. It had attempted to exchange and to purchase sufficient quotas, but had been only partly successful with the result that it had exceeded its quotas for products of Categories Ia and Ib for the third quarter.The applicant points out that that matter was the subject of arbitration within Eurofer as a result of which the fine imposed by Eurofer was reduced to 25 ECU per tonne “having regard to the good faith of Estel and to the exceptional circumstances”.Estel claims that the Commission should have done likewise. If it was not prepared to reduce the excesses over the quotas by 10548 tonnes and 18525 tonnes (see the first and second contentions respectively), it ought to have treated the total excess over production quotas — namely 44751 tonnes, less the excess over delivery quotas, namely 19951 tonnes, that is 24800 tonnes — as part of the problems connected with exportation and should have fixed the penalty accordingly.In its fourth contention, the applicant claims that in using a method of calculation of the fine which led to a double penalty the Commission had infringed Article 12 of Decision 1831/81, or, at least, Article 58 (4) of the ECSC Treaty and general principles of Community law. The Commission calculated the fine for each category of products separately on both the amount of the highest excess and 20 % of the amount of the other excess. In fact the highest excess was over production quotas, which included the (lower) excess over delivery quotas so that there was only one infringement.The applicant is of the view that the purpose of the general decision had never been to impose cumulative penalties on excesses over production and delivery quotas. Both the preamble to the decision and the text of Article 12 and the spirit thereof indicate that only the highest excess would be penalized by a fine. That interpretation had been confirmed by officials of the Commission, even though the Vice-President of the Commission, Mr Davignon, had not replied to an enquiry from Eurofer on this point.The applicant further maintains that to impose a double penalty is contrary to the general principles of criminal law as well as to the principles of sound management, of justice and of fairness, particularly when, as in the present case, the infringement involves a new decision and quotas based thereon, notification of which was late.In its fifth contention, in the alternative, Estel challenges the Commission's refusal, in fixing the amount of the fine, to take into consideration the circumstances which led to the quotas being exceeded, the blame attaching to Estel and the seriousness of the infringement.Finally, in the further alternative, the applicant's sixth contention is that the Commission infringed an essential procedural requirement by failing to provide a sufficient statement of the reasons for its decision with regard to the points which form the four main contentions of the application. It did not adequately deal with the particular circumstances of the excesses over the quotas or with the explanations given by Estel in the exchanges of letters and at the hearing.That point of view is supported by a report from Professor Tiedemann (University of Freiburg im Breisgau, Federal Republic of Germany) which the applicant annexed to its reply.Taking the view that all of Estel's contentions concern the manner in which the Commission applied Article 12 of Decision 1831/81, the Commission argues, in its general observations, that the text of that article obliges it to fix the fines for all undertakings objectively and automatically so that generally the amounts of the fines vary only in proportion to the excess over the quota. Subjective considerations connected to the particular position of the undertaking concerned have no place in that system. The severity of the system is justified by the need to ensure that the quota system is effective, in view of the seriousness of the situation facing the iron and steel industry. Strict and automatic application of Article 12 is the only way to avoid discrimination. Therefore, the Commission has never so far imposed fines of less than 75 ECU per tonne of excess over the quota on the common market.In the alternative, the Commission answers each contention individually. As to the first contention, it maintains that Estel has effectively accepted the Commission's interpretation of Article 10 of Decision 1831/81 notified to Estel in the letter from the Commission of 3 February 1982. Since that letter must be regarded as an individual decision which Estel has not sought to have annulled, Estel cannot now attack it indirectly in the action against the decision disputed in the present proceedings.With regard to the applicant's argument that it exceeded its quota in good faith, as a consequence of its different interpretation of Article 10, the Commission observes that that fact cannot be taken into consideration when applying Article 12 because that article provides for an objectively determined penalty for exceeding a quota and does not leave the Commission any discretion in determining the amount of the penalty. Likewise the degree of culpability and the seriousness of the contravention cannot be treated as relevant factors in fixing the fine.Should the Court arrive at another interpretation of Article 12, the Commission maintains in the alternative that Estel knowingly exceeded its quota and that it must bear the responsibility for its own interpretation of Article 10 ofDecision 1831/81. Estel could have asked the Commission, as author of that decision, for a precise interpretation of Article 10 immediately after the decision was adopted, as other undertakings had done.As for the second contention, the Commission also argues that Article 12 of Decision 1831/81 did not permit it, when fixing the fine, to take account of the subjective circumstances of the undertaking. Therefore, Estel cannot claim that it was uncertain of the precise meaning and effects of the provisions on deliveries to re-rolling mills.If the Court construes Article 12 differently, the Commission maintains in the alternative that Estel did in fact exceed the quotas concerned and that cannot be justified by new Eurofer rules on the exchange of quotas. They were in fact internal Eurofer rules and no concern of the Commission, a fact which Estel, moreover, admitted during the hearing.The Commission further disputes Estel's claim that deliveries to re-rolling mills do not disturb the market and that they are a normal part of re-structuring, since the products delivered by Estel in excess of its quota would otherwise have been delivered by another undertaking which might thus have made better use of its production capacity.As to the third contention, the Commission reiterates its view that Article 12 does not allow it to take into consideration the particular circumstances of an undertaking. In the alternative, the Commission maintains that Estel could have avoided exceeding its quotas by reason of its deliveries on the American market by reducing its deliveries to other customers. The fact, that Estel had been unable, in the present case, to exchange or buy quotas in order to cover those excesses over its quotas is Estel's own responsibility.With regard to Estel's fourth contention, the Commission states that the objection that the system of cumulative fines is illegal is inadmissible in so far as it is directed against Decision 1831/81 in its entirety.Such an objection is admissible only in so far as the individual decision is based on the rules which are alleged to be unlawful, that is to say in the current, case on Article 12 of Decision 1831/81. The Commission further argues that the objection that Article 12 is unlawful is also inadmissible since it relates not only to the system of cumulating fines itself, but also to the legality of the system of fixing both the production quota and the part of that quota that may be delivered on the common market and would thus have the effect of undermining the system of Article 5. However the legality of Article 5 cannot be disputed in the present proceedings either.If the Court decides that the objection of illegality is admissible, the Commission maintains, in the alternative, that it is not well founded. Article 12 is not incompatible with Article 58 of the ECSC Treaty nor with the general principles of criminal law nor with the principles of prudence, reasonableness and fairness. In the view of the Commission, the excess over the production quota and the excess over the quota that may be delivered on the common market constitute two different facts which are not necessarily linked. Each of those two excesses may be sanctioned separately and the two excesses combined constitute a more serious contravention on which a higher fine should be imposed. Consequently, the Commission contends that Article 12 does not impose a double fine for a single infringement but aggregates fines for two separate infringements.The Commission submits that it has already dealt with Estel's fifth contention in its general introductory observations.With regard to the contention that the statement of the reasons for its decision was inadequate, the Commission contends that a more precise statement of reasons was not necessary since it had strictly and automatically applied Article 12 of Decision 1831/81 which left it no discretion to take account of Subjective considerations.In general observations in its reply, the applicant argues that the Commission's interpretation of Article 12 of Decision 1831/81 is incorrect and inadmissible. Estel maintains first that the Commission has already deviated from its interpretation in imposing upon Estel a penalty of less than 75 ECU per excess tonne, namely a fine of 15 ECU per tonne on the lower excess tonnage. Secondly, the applicant denies that the text of Article 12 is clear with the word “generally” indicating a strictly automatic procedure allowing the Commission no discretion. In Joined Cases 154, 205, 206, 226 to 228, 263 and 264/78, 39, 31, 83 and 85/79 (Judgment of 18 March 1980, Valsabbia and Others ν Commission [1980] ECR 907, at p. 983), the Commission itself put forward a different point of view, namely that the word “generally” implies that the Commission may nonetheless take into consideration individual circumstances.The applicant also refers to the view expressed in the opinion of Professor Tiedemann that Article 12 does not exclude some degree of “individualization” since the terms of the provision themselves state that the fine is only “generally” of 75 ECU. That assertion is confirmed by the use of the verb “may” instead of “must” in the second paragraph of Article 12. If the Commission had wished to establish a new system of automatic sanctions with wider scope, that should have been stated unambiguously in the text of the decision.Moreover, the applicant submits that the Commission's view is not compatible with Article 36 of the ECSC Treaty. The Commission was in breach of the first paragraph of Article 36 under which it must, before imposing a pecuniary sanction, give the party concerned the opportunity to submit its comments. That “right to be heard” is one aspect of the fundamental legal right to a “fair procedure” and constitutes an essential procedural requirement. Although the decision records that Estel's observations had been examined, the Commission took no account of them and now declares in addition that it was not in a position to do so because of the terms of Article 12. As a result Estel's right to be heard was deprived of any value.Moreover the second paragraph of Article 36 provides that the Court has unlimited jurisdiction in appeals againstpecuniary sanctions imposed by the Commission so the Court has a total discretion with regard to all the circumstances of law and of fact which have led to the imposition of the sanction. The system advocated by the Commission would necessarily mean that legality would be reviewed with regard only to the grounds set out in Article 33 of the ECSC Treaty, and that would be contrary to Article 36 of the Treaty.In any event, there is nothing in the ECSC Treaty, or in particular in Article 58, empowering or authorising the Commission to take account of individual circumstances.The Commission had acted simultaneously in breach of the fundamental principles of natural justice, namely the principles nullum crimen, nulla poena sine lege, and nulla poena sine culpa, of the principle of proportionality and of the “principle of equality”, whose place in the law of the Member States and in Community law was demonstrated in the report of Professor Tiedemann and in an article by Professor Jescheck. Moreover the Court has also recognized that an error may in any event influence the amount of a sanction. The concept of an “objective” and “automatic” fine, on the other hand, is contrary to the law of most Member States, as was also shown in the Tiedemann report.Returning to its first contention, Estel points out that during the third quarter of 1982, the Commission did not expressly specify how the adjustment of quotas pursuant to Article 10 was to be carried out. The method applied by Estel was fair and entirely justifiable, and Estel was not aware that it was prohibited to exceed the quotas. Following publication of the quotas, there remained only two months of the third quarter to solve many problems. In ruling on the amount of the fine, the Court should take into consideration that, even if Estel is guilty of an infringement, the blame attaching to it is small.As for the second contention, the applicant explains that it thought that the required forecasts were for guidance and that they could be increased during the quarter. The forecasts proved to be binding and the excess over the quota caused problems because the Commission did not agree to a “transfer” to the fourth quarter.Enlarging on its fourth contention, Estel claims that the system of sanctions advocated by the Commission obliges undertakings that can sell an extra amount on the common market to reduce their exports by an equivalent tonnage and that is contrary to Decision 1831/81 according to which exports are not restricted.With regard to the statement of reasons for the decision, the applicant submits that they were not only insufficient, but also ambiguous and contradictory, and that the decision is therefore illegal. In those circumstances there is a breach of Community law independently of the question whether or not the Commission was empowered and obliged to impose a fine automatically.In its rejoinder the Commission stresses, with regard to the first contention, that authorizing the adjustment of quotas pursuant to Article 10 of Decision 1831/81 was a matter for the Commission and that undertakings were not allowed to increase, on their own initiative, the size of the quotas allocated to them. It states, in the alternative, that other undertakings had asked it what method of calculation it applied and that it notified them during the third quarter; as evidence of that assertion, it offered to call Mr Rössig, a member of its staff, as a witness. The Commission also informed Eurofer by letter of 10 November 1981 of the method of calculation, making reference to oral information given previously. The Commission does not accept that the Estel method of calculation is justifiable, still less that it is the clearest. In addition to effectively creating the possibility of additional deliveries to tube manufacturers, when there was no need for them, it also increased a production quota and delivery quotas for other purposes. The Commission maintains that the decision of 3 February 1982 adjusting Estel's quotas pursuant to Article 10, could no longer be disputed whether directly or indirectly by means of an objection of illegality.In answer to Estel's second contention, the Commission admits that it had indeed declared its readiness, when applying of Article 11 (4) to exchanges or sales of quotas, to take account of what was arranged by Eurofer. However that did not mean that it was bound to take into account any misunderstanding caused by an undertaking or a disagreement within Eurofer concerning its internal rules. In any event, there had been several ways open to Estel of avoiding exceeding its quota for the third quarter of 1981.With regard to the fourth contention raised by Estel, the Commission observes that the imposition of a fine for exceeding a quota must be examined in close connection with the system of production quotas. The assessment of the interest of undertakings that is reflected in the fixing of quotas is also necessarily of decisive importance in the assessment of interests which underlies the first paragraph of Article 12. The crisis in the iron and steel industry calls for solidarity between all undertakings, which requires them all to comply with their quotas.Thus, it is difficult, in view of its size, to consider that the fine provided for by Article 12 is a “penal” sanction. The sum of 75 ECU is not proportional to the value of the excess production. However, it is of the same order of magnitude as the proportion of fixed charges corresponding to each additional tonne produced in excess of the quota. That fine may therefore be compared with a levy which cancels out the economic advantage gained by an undertaking on exceeding a quota calculated as a flat rate.With regard to the fine of 15 ECU peltonne that it imposed upon Estel for exceeding the delivery quota, the Commission observes that it related to a separate infringement and that in reducing the standard fine it had taken into consideration the fact that there were two infringements side by side and not subjective factors specific to the understanding. It points out, in addition, that Article 12 provides that fines shall be imposed and not merely that they may be imposed.With regard to the fifth contention, the Commission emphasizes that it complied with the relevant procedural requirements and that written and oral discussion were still useful, even if it was not possible to take into account Estel's subjective position. It rejects Estcl's argument that the latter's right to be heard, guaranteed by the first paragraph of Article 36 (1) of the ECSC Treaty, was thereby infringed. Similarly it rejects Estel's allegation that the first paragraph of Article 12 of Decision 1831/81 purports to restrict the unlimited jurisdiction of the Court in any way. Article 58 (4) of the ECSC Treaty, for its part, gives the Commission the necessary power to derogate from provisions of the Treaty dealing with a normal situation, in order to take into account the requirements of a manifest crisis. Finally, there is a further provision of Decision 1831/81, namely Article 14, which, in certain circumstances, allows account to be taken of exceptional difficulties facing an undertaking.The Commission repeats that the general principles of Community law cited by Estel have not been violated and that Estel's arguments on those points are not well founded. Article 12 is not an imprecise and uncertain provision open to different interpretations; the principle in dubio pro reo is therefore not applicable here. Estel's argument based on the maxim nullum crimen sine lege is not relevant to the facts of the case. Estel was mistaken not as to whether what it was doing was punishable but as to the extent to which the Commission might mitigate the punishable nature of its actions by an ex post facto adjustment of the quota.With regard to the failure to give an adequate statement of reasons for the individual decision, the Commission is of the opinion that it suffices, according to the case-law of the Court, to set out “the principal issues of law and of fact upon which it is based and which are necessary in order that the reasoning which has led the Commission to its decision may be understood” (Judgment of 4 July 1963 in Case 24/62 Germany ν Commission [1983] ECR 63, at p. 69), without discussing objections which may be raised against the reasons given.

IV —Replies to the question put by the Court

The Court invited Estel and the Commission to give their views on the question whether the production in respect of which the fines referred to in Annex 10 to the application were imposed was also the subject-matter of a fine imposed by the Commission for infringement of Decision 1831/81.Estel replied to the question in the affirmative. With regard to the exports referred to in the third complaint, it added that the Commission, like the Eurofer arbitrators, had imposed a fine in respect of the total excess over production quotas less the total excess over delivery quotas. The difference between the two excesses could be ascribed to exports to the United States.It offered to produce evidence to show that deliveries to the United States were at least equal to that difference. In tonnage figures, the difference between the excesses over delivery quotas and the excesses over production quotas subject to fines in Categories la and lb amounted to a total of 24800 tonnes, while the Eurofer arbitrators imposed a fine based on 23623 tonnes (at 25 ECU per tonne). The difference between the two figures was due to the fact that Eurofer used a different method of calculation.The Commission replied that the production which it took into account in calculating the fines in question included the excess production established by the Eurofer arbitration court and set out in a document entitled “Encloure 3”, which is included in Annex 10 to the application. On the basis of the information at its disposal, the Commission presumes that Eurofer did not levy fines for production in excess of that on which the Commission imposed fines.

V —Oral procedure

At the sitting on 19 October 1983 oral argument was presented by the following: T. R. Ottervanger, Advocate, for Estel, and R. Wägenbaur and J. Bourgeois, members of the Commission's Legal Department, acting as Agents, assisted by P. V. F. Bos, Advocate, for the Commission.The Advocate General delivered his opinion at the sitting on 30 November 1983.

The existence of special circumstances

The question of the double penalty

The failure to give adequate reasons

The amount of the fine

Costs