Union sidérurgique du Nord et de l'Est de la France "Usinor" v Commission of the European Communities (78/83)

A —Supplementary fine for repetition of an infringement

The applicant contests the decision to penalize it for having exceeded its quotas more than once.(a) The excess production and excess deliveries in the fourth quarter of 1981 as regards Categories lb, Ic, Id and V do not concern the same product as that forming the subject-matter of the excess in the third quarter which concerns products in Category la.Article 12 of Decision No 1831/81 in no way provides that an excess in a given quarter as regards one or more products constitutes a repetition of an infringement in relation to an excess in a previous quarter as regards one or more products falling within a defferent category. An interpretation along those lines is contrary to the letter and aims of Decision No 1831/81 and would frustrate the legitimate expectations of producers in so far as it runs counter to the interpretation previously given by the Commission itself.(b) The wording of the second paragraph of Article 12 of Decision No 1831/81 can only be construed as meaning that the fine is to be increased if a manufacturer producing a single product exceeds its quota by 10% or more and if an undertaking manufacturing products in different categories exceeds its quotas to the same extent. The entire system is based on distinct quotas for each product which arc established, supervised, monitored and — where they are exceeded — penalized separately. There can be a repetition of an infringement only where the quota is exceeded twice in respect of the same product.(c) The binding provisions of the monitoring system and the system of production quotas applicable to certain products should be given a restrictive interpretation in accordance with the principle of proportionality and in order to ensure legal certainty for traders.In any event, there is no obligation on the part of the Commission to increase the fine since Article 12 provides merely for the possibility of increasing it.(d) The arguments concerning the efficiency of the system which were put forward by the Commission in order to enable it to rely on the wording of the second paragraph of Article 12 are not persuasive.A fine of 75 ECU per tonne is a very severe penalty. Excess production or excess deliveries are not the result of deliberate planning: they are attributable to necessity, to a misinterpretation of the relevant provisions or to a lack of coordination which cannot be ruled out in large groups.Furthermore the Commission disregards the true state of the market when it maintains that a system restricting the concept of repetition of an infringement to cases in which quotas are exceeded repeatedly in respect of the same product would leave large undertakings free to choose which quotas for the different categories of products they wish to exceed and enable them permanently to destabilize the market in iron and steel products. There is no demand on the market for all the products available enabling a multiple producer to exceed its quota at one time in respect of one product and at another time in respect of a different product.(e) The Commission's interpretation leads to discrimination against multiple producers and, more particularly, against integrated undertakings which comprise for legal purposes a large number of industrial establishments under separate management. It is virtually impossible for such undertakings to avoid exceeding their quotas at all as regards all categories of products during the same period. However, it is relatively simple for a producer manufacturing a single product or an undertaking comprising only one or a small number of factories to comply with the quotas allocated to it, even if it manufactures products in several categories.(f) The Commission undertook by an internal decision to classify as a repetition of an infringement only cases where a quota is exceeded repeatedly in respect of the same product. All producers were notified of that interpretation.The new definition of a repetition of an infringement, which was given by the Commission for the first time when the contested decision was adopted, has particularly grave consequences because it involves the application of the criterion of a repetition of an infringement throughout the entire period covered by Decision No 1831/81. At the very least, the Commission should have notified all undertakings before the first quarter of 1981 of its new interpretation of the concept of repetition of an infringement. That interpretation cannot be applied retroactively arid the fines accordingly imposed on the applicant (which amount to 550701 ECU) should therefore be cancelled.The Commission points out that the severe penalties provided for by the second and third paragraphs of Article 12 of Decision No 1831/81 are the only means of ensuring compliance with the quota system.(a) In order to deter undertakings from creating by repeated and substantial excess production or excess deliveries an imbalance between supply and demand on the market during a period of crisis it is necessary to be able to increase the “normal” fine. The level and frequency of excess during the period when production quotas apply must be taken into account when fines are set. In the absence of such provisions, successive quota systems, which are introduced every time for periods of limited duration and which regulate the market strictly by dividing the year into quarters, are far less likely to succeed.(b) In the exercise of the power conferred upon it by Article 12, the Commission increases the fine by 10% of 75 ECU per tonne in the case of undertakings operating at a loss and by 25% in the case of profit-making undertakings and it doubles those amounts (to 20% and 50% respectively) where the quota is exceeded by more than 10% or is exceeded repeatedly if both conditions are satisfied.Those rates are well below the 100% limit which is permitted by Article 12 and constitute the only “internal decisions” adopted by the Commission in that respect.The penalties are intended to have a deterrent effect. A system in which heavier penalties are imposed only where the quota is exceeded repeatedly in respect of the same category of products would not only discriminate between producers manufacturing a single product and multiple producers, but it would also create an absurd situation. Large undertakings would be free to choose which quotas for the different categories of products they wished to exceed and would thus permanently destabilize the market in iron and steel products.The contention to the effect that it is particularly difficult for a multiple producer to avoid exceeding its quotas at all as regards all categories of products cannot be accepted. That view is gainsaid by the very conduct of the applicant.The contested decision does not infringe either Article 12 of Decision No 1831/81 or Article 58 (2) of the ECSC Treaty; on the contrary, it ensures that the system achieves its purpose more successfully and perhaps more rapidly.(c) As far as the principle of proportionality is concerned, it must be emphasized that the amount of the fine is appropriate in view of the nature of the infringement — which was a second infringement of the Commission's decisions — irrespective of whether it was committed by a large or by a small undertaking, by a producer manufacturing a single product or by a multiple producer.(d) As regards the alleged legitimate expectations of the steel undertakings, it must be remembered that oral statements by officials of the Commission and minutes drawn up by the undertakings' association are not binding on the Commission. In any event, the statements in question were allegedly made in the spring of 1983 and are in no way connected with the applicant's excess production and excess deliveries in the fourth quarter of 1981.

B —Imposition of a double penalty

The applicant contends that the Commission unlawfully imposed a double penalty upon it for exceeding production quotas and quotas for deliveries on the common market. In its view, therefore, the contested decision should be declared void as regards the excess over the delivery quotas for Categories lb (356025 ECU), Id (225525 ECU) and V (5025 ECU).(a) That double penalty is contrary to the logic of the system and to the interpretation formerly placed by the Commission itself on Article 12 of Decision No 1831/81 and on the provisions of that decision concerning quotas and failure to abide by them.The fact that the excess deliveries on the common market are greater than the excess production shows that the production quotas were used entirely for deliveries on the common market and that there was accordingly a fall in exports to non-member countries. Consequently, by imposing a penalty on the applicant for exceeding deliveries on the common market, the Commission is also penalizing products which form the subject-matter of excess production since such excess was used entirely for deliveries on the common market. By-penalizing the excess in both cases, the Commission is penalizing the same tonne of products twice over.(b) The imposition of a double penalty under Decision No 1831/81 serves no purpose since the period of validity of that decision has expired and the conduct of the undertakings can no longer be influenced by it.(c) Since the rules laid down by Article 58 of the ECSC Treaty constitute a derogation from the general rules, to be applied in special cases, the provisions concerning fines must be given a restrictive interpretation and the principle nulla poena sine lege must be applied particularly strictly. It is clear from the ninth recital in the preamble to Decision No 2794/80/ECSC of 31 October 1980 establishing a system of steel production quotas for undertakings in the coal and steel industry (Official Journal 1980, L 291, p. 1), from Article 9 of that decision and from Article 12 of Decision No 1831/81, that no increase in the penalty is envisaged where both the production quota and the quota for deliveries on the common market have been exceeded.(d) The Commission cannot, of its own accord and in disregard of the procedures laid down by the Treaty for the adoption of legislation, impose a penalty more severe than that provided for by Article 12 of Regulation No 1831/81.The imposition of new, more severe penalties which are not provided for in the general decision constitutes a misuse of power which must of necessity result in a declaration by the Court that the contested individual decision is void.(e) During discussions with representatives of Eurofer (European Confederation of Iron and Steel Industries), the Commission undertook not to impose a double penalty. If the applicant had entertained the slightest doubt in that regard, it would have acquired additional production quotas which would have enabled it to avoid being penalized for exceeding its production quotas. It frustrates the legitimate expectations aroused in producers, in particular the members of Eurofer, by the interpretation which they were given of the system of penalties, to impose on them a double penalty which they could not foresee at the beginning of the fourth quarter of 1981.To accept the Commission's reasoning would lead to the view that there is no place for mutual trust and cooperation between the Commission and Eurofer. Relations based on mutual trust are essential, however, if the quota system is to function properly since Eurofer serves as a communication channel for the Commission to ensure the success of the measures decided upon.(f) The Commission adopted and informed traders of a course of action which it subsequently altered by taking a new approach retroactively. The principle of legal certainty requires that rules imposing charges on the taxpayer must be clear and precise so that he may know without ambiguity what are his rights and obligations and may take steps accordingly. If, as seems most unlikely, the Court were to regard as lawful the double penalty which the Commission claims to be able to impose, it would have to rule that the principle of non-retroactivity precludes the imposition of a penalty in respect of the fourth quarter of 1981.The Commission considers that the contested fine does not constitute a double penalty, is entirely consistent with Article 12 of Decision No 1831/81 as regards the point at issue and in no way frustrates the legitimate expectation of steel undertakings.(a) It is clearly apparent from the wording of Article 12 of Decision No 1831/81 that fines are fixed in accordance with objective criteria for all undertakings. As a general rules, the fine varies only in accordance with the extent to which the quota has been exceeded. Subjective considerations relating to the specific circumstances of each undertaking or of all the undertakings belonging to an association have no place in that system. The severity of the system is justified by the need to ensure that the quota system operates effectively. The gravity of the crisis in the iron and steel industry compels the Commission to adopt special measures which must be strictly and automatically applied if discrimination between undertakings, which is capable of adversely affecting the system as a whole, is to be avoided.Article 5 of Decision No 1831/81 provides that steel undertakings are to be subject each quarter to two obligations. They must ensure that production of various iron and steel products is not in excess of the quantities fixed and they must not deliver on the common market a part of the quota greater than that determined by the Commission. Steel undertakings might infringe those rules every quarter, in respect of each category of products, in two different ways. They could exceed either the production quota or the part of that quota which may be delivered on the common market. The logic of the system requires that penalties be imposed for excesses in both cases. It is clear from Article 12 that a fine is imposed on an undertaking both for exceeding the production quota and for exceeding the part of the quota which may be delivered on the common market. If, in a given quarter, those two quotas are exceeded in respect of a single category of products, a fine is imposed in respect of the excess in each case. The purpose of Article 12 is to penalize effectively every infringement of the quota system.If, where the quota and the part of the quota which may be delivered on the common market are exceeded, the Commission were able only to penalize one excess or the other, the system established by Article 5 would be jeopardized.(b) The Commission denies penalizing the same excess twice over. It would be a case of two penalties in respect of the same infringement if the entire production of iron and steel undertakings were sold on the common market. In that case, if the production quota were exceeded, it would inevitably lead to an increase in deliveries on the common market and to penalize both the excess production and the excess deliveries would amount, in such a case, to the infliction of punishment twice over in respect of one and the same infringement.An undertaking may, however, exceed its production quota because it has the opportunity to increase its deliveries on the world markets. In that case, the part of the quota which it may deliver on the common market would not be exceeded. Conversely, an undertaking may comply with its production quota but exceed the part of that quota which may be delivered on the common market, where its exports to non-member countries have fallen. Two different situations are involved which do not necessarily coincide with one another. Where the excess production and the excess deliveries coincide in a specific case, they may be classified as unequivocal infringements liable to attract a more severe penalty. To exceed the production quota at the same time as the part of the quota which may be delivered on the common market constitutes a more serious infringement in respect of which Article 12 provides for the imposition of two fines. Article 12 does not fix a double fine in respect of a single infringement.It would be unfair to penalize an undertaking which commits two infringements — excess production and excess deliveries — in the same manner as an undertaking which commits a single infringement.(c) To speak of a “more severe punishment” is to miss the point. There have been two penalties for two different infringements since the adoption of Decision No 1831/81. The Commission did not adopt a more stringent provision “in the meantime”. Article 12 remains unchanged(d) Oral statements by Commission officials must be formally approved by the competent authorities, namely by the Commission or by one of its Members who is authorized to do so. Silence on the part of the Commission is not tantamount to agreement.A legitimate expectation on the part of an individual may arise only in relation to provisions of Community law from which he expects or is entitled to derive certain rights and not in relation to a statement allegedly made by an official which is in no way binding on the Commission. Article 12 of Decision No 1831/81 provides for the imposition of a fine in the event of any excess. Moreover, the concept of legitimate expectation implies that individuals have every right to expect a favourable system under which they derive certain rights to be retained, if its abolition, with immediate effect and without notice, may be detrimental to their interests. In this case, however, the allegedly advantageous system from which the applicant claims to derive certain rights was not introduced until after the applicant had exceeded its quotas and parts of quotas in the fourth quarter of 1981.(e) At no time did the Commission intend to ask Eurofer for a legal interpretation of its decisions or for advice regarding the imposition of fines.

C —Excess over the quotas in respect of Category lb

The applicant contends that certain products in Category lb should not have been regarded or reported as such. The basic penalty imposed on the applicant for exceeding the quota for that category should be reduced by 60525 ECU, corresponding to an excess of 4034 tonnes, on. the ground that the detailed rules for the allocation of quotas were incorrectly applied.(a) As a result of certain technical difficulties which arose during the fourth quarter of 1981, the applicant was compelled to resort to sub-contractors in order to supply its customers in due time with products in Category Ic (galvanized sheet). The quota system provides that where an undertaking itself processes a product in Category lb (coils for cold rolling) into products falling within Category Ic, the production of coils for cold rolling is not covered by the quotas allocated to that undertaking since quotas were allocated to it exclusively in respect of the finished product falling within Category Ic. Since the applicant was compelled to assign to sub-contractors the quotas for Categoiy lb covering the galvanized sheet subcontracted by them, the applicant did not report the coils for cold rolling which it manufactured and in respect of which it had not been allocated a quota.(b) That approach is consistent with the objectives pursued by Article 58 of the ECSC Treaty. It does not involve any increase in the production of the pre-products in question or of the finished products, and the quantity of products in Category Ic which is marketed remains within the quotas for Category Ic allocated to the applicant.(c) The applicant notified in due time the Commission's inspectors who only made their position known belatedly, at a time when the applicant could no longer obtain additional production quotas pursuant to Article 11 (4) of Decision No 1831/81.The difficulties which arose in the fourth quarter of 1981 are attributable to the fact that the wording of Decision No 1831/81 is couched in excessively broad terms and to the Commission's failure to provide in due time, that is to say before the expiry of the transitional period, information concerning the procedure which it wished to see followed. When the difficulties in question arose, no solution had yet been proposed by the Commission(d) The Commission acknowledged belatedly that it was necessary to find a general solution for undertakings which were in a position similar to that of Usinor in the fourth quarter of 1981. It therefore adopted Decision No 1619/83/ECSC of 8 June 1983 (Official Journal 1983, L 159, p. 56) which provides in particular that “in order to facilitate exchange of quotas between undertakings it is necessaiy to establish for transfer, quotas for products which are not covered by the quota system because their further processing has taken place within the same undertaking”. If the Commission had adopted Decision No 1619/83 sooner, the applicant would have applied for the allocation of notional quotas for Category lb, to which it was not entitled under the previous system. Under the new system, it would have assigned the production quotas for Categoiy Ic to its sub-contractors, which are galvanizing undertakings, and it would have obtained from the Commission additional quotas for Categoiy lb to cover the coils for cold rolling supplied to its sub-contractors. The solution to the question of transfers of production which was finally adopted by the Commission leads to the same result as the solution advocated by the applicant. It would be quite anomalous to penalize the applicant for the excess recorded, since the applicant was unable to avoid it and endeavoured to find a practical solution, in view of the absence of clear and precise legal provisions on the matter.(e) The fact that the applicant was able to comply during the first quarter of 1982 with the instructions given by the Commission for the interpretation of Decision No 1831/81 can be explained by the fact that the Commission had finally stated its position. It does not follow from this that the Commission's interpretation of a measure which was worded in excessively general terms was justified.(f) None of the solutions belatedly recommended by the Commission could be adopted.The acquisition from third parties of the quotas for Category lb which were required in the first two months of the fourth quarter of 1981 could not have been reported within the prescribed period. To suggest that permission could have been sought to carry over the quotas for Category Ic is wholly unrealistic for commercial reasons. To request galvanizing undertakings to manufacture cold-rolled sheet is unrealistic for technical reasons.(g) On a market as competitive as the steel market, in which it is advisable not to lose customers and in which vigilant competitors, particularly those from non-member countries, are ever present, priority must be given to satisfying the customer. The Commission disregards such matters. Its position is contrary to the principle of proportionality. It leads to the imposition of a penalty for a purely technical excess which is the result of compelling constraints.The Commission considers that the contested quotas were allocated in accordance with Decision No 1831/81, that it cannot be reproached for any delay or injustice and that there is no reason for adopting the applicant's interpretation.(a) It is clear from Article 1 of Decision No 1831/81 and from Annex I thereto that, as regards the allocation of quotas, the only products excluded from Category lb are, apart from two specific products, material intended for production in the same undertaking of coated products. Those provisions are unequivocal and the applicant's “hypothetical” interpretation is unacceptable.(b) If undertakings rely on hypothetical situations and propose specific interpretations of the relevant provisions they do so at their own risk.(c) There was no delay on the part of the Commission's inspectors in stating their position.(d) The applicant could have resorted to other methods in order to avoid the contested excess production and excess deliveries. It could have obtained from third parties the quotas for Category lb which it needed in the first two months of the quarter in question. It could have requested the Commission for permission to carry over its quotas for Category Ic, pursuant to Article 11 (3) of Decision No 1831/81. It could have requested third parties to manufacture the sheet and to galvanize it, in return for a similar concession after the technical difficulties in question had been overcome. The reasons given by the applicant for discarding those alternative possibilities cannot be accepted. Instead of complying with Community law as a matter of priority, the applicant was motivated by considerations of profit.(e) The reference to Decision No 1619/83 is of no relevance. That decision took effect for the most part after the events in question. The applicant is no longer entitled to challenge the basis on which its quotas were fixed. Decision No 1619/83 does not in any circumstances cover alleged instances of force majeure — such as that relied upon in the present case — which are covered by other provisions such as Article 11 (3) of Decision No 1831/81.

D —Excess over the quotas in respect of Category Id

The applicant contends that the excess over the quotas for Category Id consists largely of monogal, an entirely new product. The speed and the extent of the development of that product prevented it from being taken into account when the reference quantities were fixed and rendered the excess inevitable inasmuch as, on a market in recession, the applicant would have been seriously at fault had it failed to satisfy demand for the product.The Commission belatedly recognized the problem raised by the transfer of demand to the new product and did not adopt Decision No 1619/83 until it was too late; in that decision it acknowledged that the rapid growth in demand for that product constituted a radical change in the steel market, which caused unexpected difficulties with the application of the quota system.It is contrary to the spirit and the letter of the Treaty and to Article 16 of Decision No 1831/81 to impose a fine on the applicant in respect of the excess in question.The Commission points out that since the applicant did not contest the level of the parts of the quotas allocated to it for the product in question, it can no longer do so in these proceedings.Generally, it should be noted that, having regard to the state of the market in the products falling within Category Id during the fourth quarter of 1981, the quotas allocated appeared to be adequate, and in any event capable of permitting as between undertakings transfers which could have covered the excess in question. In this specific case, the applicant failed to inform the Commission of its position as regards monogal and merely exceeded its quotas.As regards the application of Decision No 1619/83, an undertaking must establish the existence of certain factors, in particular that its customers wish to purchase a product in Category Id rather than a product in Categories lb or Ic. Moreover, any adjustment in Category Id involves a corresponding reduction in Categories Ib or Ic.

E —Excess over the quotas in respect of Category V

The applicant considers that Article 14 of Decision No 1831/81, as amended by Decision No 1832/81, discriminates against some undertakings by reducing their possibilities of applying for an adjustment of their reference production. It discriminates against integrated undertakings whose quotas for each product are calculated on the basis of their aggregate production without taking account of the large number of small and medium-size undertakings which are under independent management even though for legal purposes they form part of a single group.In this case, the contested excess is attributable to the operations of a small factory manufacturing a single product which is situated in the Paris region and which, had it not been legally incorporated in the Usinor group, could have benefited from the adjustment provided for by Article 14 of Decision No 1831/81.The quota system created exceptional difficulties for that factory, which is geographically isolated in the Paris region and which was confronted with special problems, namely the number of days lost as a result of short-time work and social disputes. It did not qualify for an adjustment of its references under the provisions of Article 2 (3) in conjunction with those of Article 14 of Decision No 1831/81.In view of the discriminatory nature of those provisions, preventing the sole undertaking engaged in the manufacture of concrete reinforcing bars within the Usinor group from taking advantage of the possibilities of adjustment which are available to competing undertakings operating under the very same conditions, the Court should, in the exercise of its unlimited jurisdiction, reduce the fine concerning the products in Category V, having regard to the circumstances in which the quotas were exceeded.The Commission contends that the objection of illegality raised against Article 14 of Decision No 1831/81 is inadmissible since the contested decision is not based on any aspect of that provision but is founded on Article 12.Moreover, the applicant failed to establish that the overriding principle embodied in Article 58 (2) to the effect that quotas must be determined on an equitable basis and the principles laid down in Articles 2, 3 and 4 of the Treaty were not complied with in Decision No 1831/81. The applicant has adduced no evidence in support of its contention that Decision No 1831/81 gives rise to discrimination.It was necessary to restrict the exemptions for undertakings producing concrete reinforcing bars and other merchant bars to a group of undertakings which can be clearly distinguished from the others both by the size of their plants and by their dependence on a limited range of products.Contrary to the applicant's contention, its subsidiary was not faced with exceptional difficulties since its capacity utilization rate in the fourth quarter of 1981 was, more favourable than that of most of its competitors.The applicant has not provided any justification for a reduction of the fine imposed in respect of the excess production and excess deliveries of products in Category V.

Excess over the quotas in respect of Category V

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