61985C0344

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Mr President,

Members of the Court,

1 . Ferriere San Carlo SpA asks the Court to declare void the decision of 9 October 1985 in which the Commission of the European Communities imposed on it a fine of 117*500*ECU on the ground that it had exceeded the quota for reinforcing bars ( Category V ) which it could deliver on the common market during the last quarter of 1983 .

The legislative framework of the dispute is well known . In June 1981, in order to deal with the continuing serious crisis in the European steel industry, the Commission established a new system intended to control production, based on a scheme of quarterly quotas ( Decision No 1831/81/ECSC of 24 June 1981, Official Journal 1981, L*180, p.*1 ). Essentially, for the period from 1 July 1981 to 30 June 1982 undertakings were required :

( a ) to observe, in respect of certain categories of products, production and delivery quotas fixed at the beginning of each quarter by the Community authorities;

( b ) to report their production and deliveries each month .

The legislature expected that the system thus established would enable undertakings "to draw up their production programmes and ... give the Commission an opportunity, when imposing new quotas in respect of the ensuing quarter, to allow for variations in supply and demand ..." ( fourth recital in the preamble ).

That decision' s successor, Decision No 1696/82/ECSC of 30 June 1982 ( Official Journal 1982, L*191, p.*1 ), did more than extend the life of the abovementioned system for one year . Experience had "shown that effective monitoring of the system of production quotas demands exact knowledge of the stock situation at the beginning of the period of application of (( the )) decision" ( third recital in the preamble ). In other words, the Commission had become aware that undertakings could "hide" possible excesses of production in a given quarter by claiming that the quantities manufactured in excess of the quota formed part of a stock which already existed before the reform . They were therefore required to declare, solely in respect of products subject to the quota system, their stock position as at 30 June 1982 ( second subparagraph of Article 2*(1 )*).

Finally, by Decision No 2177/83/ECSC of 28 July 1983 ( Official Journal 1983, L*208, p.*1 ), which is also the decision applicable in this case, the system was maintained in force until 31 January 1984 . Products in Categories II and III were also made subject to the quota system and the undertakings concerned were therefore required to report their stock position as at 30 June 1983 in regard to those products .

2 . Let me now consider the substance of the application . Reduced to its essentials, the applicant' s argument is very simple . It claims that the new rules do not expressly prohibit the sale outside the quota system of products in stock, on condition, however, that they were lawfully accumulated, that is to say, in compliance with the production quotas . That is precisely the case in regard to the consignment of bars for which the fine was imposed; it comes from a stock of 7*327 tonnes which was held in stock on 30 June 1983 and declared by San Carlo to the supervisory authorities . Furthermore, that stock was perfectly lawful because during the period from 1 July 1982 to 30 June 1983 the undertaking scrupulously observed the production quotas allocated to it .

That is not all . The excess deliveries in the fourth quarter of 1983 are also justified by the tolerance which the Community institutions have displayed for some time . It is clear that undertakings disposed of stocks left over from the previous system through sales carried out outside the limits laid down by the quarterly delivery quotas both after the adoption of Decision No 1831/81/ECSC and the following year, that is to say during the period of application of Decision No 1696/82/ECSC . The Commission imposed no sanctions on any of those undertakings . In such circumstances, San Carlo considers that it cannot be denied that the excess deliveries complained of were made in good faith . Consequently, the fine imposed on 9 October 1985 is unjustified .

3 . The application cannot be upheld . With regard to the first argument, I must point out that if undertakings were really entitled to sell, without any limitations as to deliveries, stocks accumulated under the production quota system ( and thus, to stock part of the production allocated to them each quarter in order to sell it later outside the quota system on the common market, which is the most advantageous ) the Community authorities would no longer be able to control the development of supply and demand . However, in Section 1 I have shown that that control is one of the most important objectives of the reform introduced in 1981 .

It is certainly true that no provision expressly prohibits that sort of practice . However, the reason for that silence is evident . As the Court is aware, under the new system the Commission fixes quotas on a quarterly basis, and for that purpose each undertaking is required to report its production and deliveries every month . Since compliance with the quota system excludes of itself the creation of stocks, it is logically impossible to speak of "legitimate" stock . In other words, after 1 July 1981 undertakings could no longer lawfully constitute or increase stocks of products subject to quota with the intention of selling them freely within the Community . It was therefore unnecessary to prohibit such trade .

Furthermore - and here I turn my attention to San Carlo' s second argument - the reform gives rise to a problem of transitional arrangements, which Brussels recognized and tried to resolve after the decision had been adopted . On 1 July 1981, undertakings could have stocks of steel or reinforcing bars manufactured within the limits of the quotas laid down under the previous rules . In order to avoid making them subject to the restrictions introduced by the new system, and thus "penalizing" the producer twice, it was decided not to bring proceedings during the succeeding 12 months in respect of deliveries made outside the quota system . As can be seen from the statement of the reasons on which the contested measure is based ( page 3 ), a similar decision not to impose sanctions in respect of infringements was later taken for the period from 1 July 1982 to 30 June 1983 . However, the Commission took that approach because it appeared that a considerable number of undertakings had mistakenly interpreted the obligation to report their stock position on a specific date as implying that they were free to dispose of those stocks on the common market .

There is no doubt, at least in the second case, that the supervisory authorities acted in a very "tolerant" manner . However, that is not sufficient to justify the conduct of San Carlo on the basis that it acted in "good faith" . I should point out that during the two years following the reform the practice was to permit the disposal of old stocks, that is to say those accumulated before 1 July 1982, but not to permit undertakings to increase them or to constitute new stocks . However, it can be seen from the file that during the period from 1 July 1982 to 30 June 1983, the applicant not only did not definitively dispose of its stocks but continued to increase them, the total going from 2*741 tonnes to 7*327 tonnes . That being so, its allegation that it acted without being aware that it was committing an infringement is without foundation . What it sold outside the quota system had in fact been accumulated in bad faith .

At the hearing, the applicant replied that the 2*343 tonnes at issue were in stock before 1 July 1982 and, consequently, could be lawfully disposed of in addition to its delivery quotas . I do not reject the possibility that the facts alleged are correct but I do not see how that could change the conclusion which I propose to the Court .

The contested sale took place towards the end of 1983, that is to say at a time when the obligation to comply with the quarterly delivery quotas for reinforcing bars must be regarded as absolute or, in any event, as no longer subject to the exceptions permitted until July of that year . With regard to products in Category V, Decision No 2177/83/ECSC, in force at the time of the delivery, imposed no new obligation to report stocks but merely extended the duration of the quota system . Consequently, after 1 July 1983 existing stocks, even those constituted before July 1982, could no longer be sold on the common market without infringing the quarterly limitations fixed for the category .

Finally, if the applicant actually considered itself entitled, during the final quarter of 1983, to dispose of 2*343 tonnes of reinforcing bars accumulated before 1 July 1983, it should have contested the lawfulness of the delivery quota fixed for that period . It did not do so, however, and because the decision in which the Commission informed it of its quota has since become definitive, it cannot do so now in the context of an application for the annulment of a fine ( see the judgment of the Court of 10 December 1986 in Case 41/85 Sideradria v Commission (( 1986 )) ECR 3917, paragraph 10 ).

4 . Having regard to the foregoing considerations, I propose that the Court should dismiss the application brought on 15 November 1985 by Ferriere San Carlo SpA and, in accordance with Article 69*(2 ) of the Rules of Procedure, order the applicant to pay the costs .

(*) Translated from the Italian .