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Opinion of Mr Advocate General Darmon delivered on 10 December 1986. - Cockerill-Sambre SA v Commission of the European Communities. - ECSC - Fines - Transfer of quotas. - Case 350/85.

European Court reports 1987 Page 00929

Opinion of the Advocate-General


Mr President,

Members of the Court,

1 . In the present application Cockerill-Sambre SA claims that the Court should declare void the Commission decision of 9 October 1985 imposing a fine of 22*750*ECU on it for exceeding its production quotas for Category IV steel products during the fourth quarter of 1983 .

Judgment in the case will involve interpretation and application of Article 11 ( 4 ) of Commission Decision No 2177/83 of 28 July 1983 on the extension of the system of monitoring and production quotas for certain products of undertakings in the steel industry . ( 1 )

As the Court is aware, the quotas are fixed on a quarterly basis . Article 11 ( 4 ) provides :

"Undertakings may, each of the undertakings concerned having made a prior declaration to the Commission, enter into arrangements with other undertakings during the current quarter for the exchange or sale of quotas or the parts of quotas which may be delivered on the common market pertaining to that quarter ."

2 . The applicant complains that the Commission has adopted a formalistic interpretation of Article 11 ( 4 ) which disregards economic reality and has led to the applicant being wrongly charged with exceeding its quota .

It is not denied ( indeed the Commission took it into account in reducing the amount of the fine ) that Cockerill-Sambre encountered production difficulties following the fire in January 1983 at its plant at Valfil . It was thus natural that to meet its commitments to its customers it exercised the right given it by Article 11 ( 4 ) to transfer part of its quota during the fourth quarter of 1983 to other producers including the company, Thyssen .

It is true that during the first quarter of 1984, more precisely on 15 February, Thyssen in turn transferred to the applicant 4*892 tonnes of quota stating that it was returning the quota which it had received during the past quarter .

3 . I agree with the Commission' s view that the quota was returned too late and that the quantity in issue could not be completely or partly deducted from the excess with which Cockerill-Sambre was charged .

Any private agreements between Cockerill-Sambre and Thyssen ( the latter had carried out processing for the applicant and had undertaken to return any unused quotas at the beginning of the following quarter ) cannot be relied upon against the Commission and cannot affect the quarterly basis on which the rules in issue operate .

Those rules were originally introduced by Commission Decision No 2794/80/ECSC of 31 October 1980 establishing a system of steel production quotas for undertakings in the iron and steel industry . ( 2 The preamble thereto is illuminating on this question .

The Commission found that the means of action allowed by Article 57 of the ECSC Treaty were not sufficient to deal with the manifest crisis following the severe fall in demand for steel; consequently, point 4 of the preamble states that quotas should be established "on a quarterly basis to enable the undertakings to draw up their production programmes and also to enable the Commission, when setting new quotas for the following quarter, to take account of fluctuations in supply and demand and of experience gained ."

In Lucchini it was emphasized

"that the quarterly nature of the quota system established by Decision No 2794/80 is an essential element of the scheme ". ( 3 )

To be deducted from Cockerill-Sambre' s undisputed excess production Thyssen should have returned the quotas before the expiry of the fourth quarter of 1983 and not on 15 February 1984 .

4 . Is such a view too formalistic, as Cockerill-Sambre maintains, is it purely a matter of accounting and does it disregard economic reality?

I do not think so and indeed am convinced of the contrary . The Commission was not contradicted when in its rejoinder it stated that during the quarter in question the combined production of the two undertakings exceeded their joint quotas .

Only the tolerance margin of 3% allowed by Article 11 ( 1 ) saved :

Thyssen from being fined, since its excess of 4*812 tonnes was within its tolerance margin of 9*851 tonnes, and Cockerill-Sambre from being fined for no more than 910 tonnes in spite of an actual excess of 4*432 tonnes, since its tolerance margin was 3*522 tonnes .

If the return of quotas by Thyssen, although effected during the first quarter of 1984, had been accepted, it would have gone against its tolerance margin for the previous quarter . That is not the purpose of the tolerance margin, which is intended to allow for uncertainties in forecasting and not to constitute a kind of surplus to be used subsequently .

This is the essence of the economic reality, which must be understood from the viewpoint of the steel undertakings and the Community .

As regards the Community, the Commission' s task is to exercise control over the total production of steel products . In order to do so it sets quotas on a quarterly basis so as to allow it to adjust them in accordance with the economic situation, and it checks that the quotas are observed in order to ensure that the measures it has adopted to remedy the state of manifest crisis are effective .

From the viewpoint of steel undertakings economic reality requires that there should be some flexibility to soften the rigidity of the quota system . There are several possibilities for that purpose and they include the following two which we have encountered in the present case :

The total or partial transfer of quotas to enable short-term production difficulties to be overcome;

A tolerance margin of 3% to take account of the specific nature of this kind of production, which does not allow absolutely accurate forecasting .

Such a system can function only if the Commission is vigilant and the manufacturers have a sense of Community responsibility . This shows once again "that the quarterly nature of the quota system is an essential element of the scheme ".

To abandon it, as Cockerill-Sambre is claiming to be allowed to do, would run counter to the objective of the rules and would seriously impair their effectiveness by allowing, as I have shown, any undertaking concerned to transfer, after the quarter has expired, not even actual quotas but parts of tolerance margins subsequently determined .

My opinion is therefore that the application brought by Cockerill-Sambre should be dismissed and it should be ordered to pay the costs .

(*) Translated from the French .

( 1 ) Official Journal 1983, L*208, p.*1 .

( 2 ) Official Journal 1980, L*291, p.*1 .

( 3 ) Case 179/82 Lucchini v Commission (( 1983 )) ECR 3083, at paragraph 20 on p.*3094 .