(aa)

The Commission's general contention, which my colleague Mr Advocate General Reischl also discussed in his opinion in Case 14/81 ( 2 ), is that it has wide discretion in elaborating the quota system. It argues that the matter is one of the “evaluation of the situation resulting from economic facts or circumstances” within the meaning of Article 33 of the ECSC Treaty. But if under Article 33 only complaints that the Commission has misused its powers or manifestly failed to observe the provisions of the Treaty are admissible this means that when a quota system is reviewed by the Court all the latter may do is to verify whether the Commission has kept within the outermost limits of the discretion accorded to it.

The discretion, which as I have mentioned is accorded to the Commission, can hardly be ignored and consequently this must be borne in mind as a fundamental factor in the present context. I have already pointed out that the Commission has the power but not the duty to introduce the levy system mentioned in Article 58 and that it is hardly proper to draw, from the existence of that power, inferences relating to a situation, such as those in this case, where in the exercise of its discretion the Commission does not use that power.

(bb)

It must also be remembered that the problem of using production capacity as a criterion for the quota system has been significant in a number of other cases. Mr Advocate General Reischl expressed doubts in his opinions in Cases 25S/80 ( 3 ) and 14/81. I myself in my opinion in Joined Cases 39, 43. S5 and 88/81 ( 4 ) have pointed out the doubts which, from the point of view of the aims pursued by the quota system, arise here from considerations relating to the market economy as regards the need to encourage a reduction of capacity and from the fact that less efficient undertakings might be put at an advantage if capacity alone is taken into account. In its judgments in those joined cases and in Case 14/81 the Court accordingly held that the Commission is free to choose the basis upon which quotas are determined and actual production must be considered an appropriate criterion because it avoids the uncertainties involved in using capacity as a criterion and enables production to be reduced without altering undertakings' positions on the market.

This case indeed illustrates the problems which arise in the determination of capacity and its utilization, particularly if statements of previous maximum possible production are compared with the corresponding actual production. Furthermore the applicant's argument plainly implies a redistribution of production and in some cases a considerable change in market positions which depends on many factors, for example the type of product and the adaptation of production in good time. For if under the general programme for adjusting production to the decline in demand an undertaking is allocated above-average quotas based on its production capacity then if the aim pursued is to be achieved other undertakings' quotas will need to be reduced and in some cases jobs in other undertakings will therefore be jeopardized, a factor which must not be forgotten, especially in this context.

These considerations alone doubtless suffice to refute the applicant's argument, even it, as it maintains, undertakings' production capacity should not be the main criterion but simply be used to rectify production quotas which in principle are determined according to actual production.

(cc)

Moreover — and this is the most important point of all — as I mentioned in my introductory remarks, the principle put forward by the applicant is not in fact to be found in the Treaty.

There is certainly no hint of it in Article 2, which requires inter alia“continuity of employment” to be “safeguarded”, or in Article 3 (e), which mentions improved working conditions and an improved standard of living for workers. If, in spite of the generality of the phrases used, it is sought to deduce from those provisions the requirement that when production is restricted the necessary sacrifices should be spread evenly among workers, then it hardly seems incompatible with that requirement (precisely because in general the number of jobs depends not on an undertaking's capacity but on its actual production) for the emphasis to be on actual production and for care to be taken to ensure that it is reduced uniformly, which prevents individual undertakings from suffering a disproportionaiely large fall in production and the consequential effects on the labour force.

But, as I have already mentioned, Article 58 itself is also incapable of substantiating the existence of the principle postulated by the applicant. In particular, I have already observed that it is hardly possible to deduce from a system, which is not prescribed, and which the Commission in the exercise of its discretion does not apply, principles governing a system which the Commission actually does apply. In so far as the second sentence of Article 58 (2) provides for the regulation of the level of activity of undertakings and the fixing of a reference level for production it is clear too that as regards the levy system it is indeed supposed that rates of utilization vary and therefore that a minimum rate of utilization cannot be guaranteed. Another important point is that employment must be maintained, by means of compensation payments, only “as far as possible” and, in the case of the desired production restrictions, nothing else seems possible.

In view of this it might possibly be thought that this guiding principle should also be given effect in a system of production quotas. In this regard it may be assumed that the lower the rate of an undertaking's utilization of its capacity the greater the risk to jobs. To my mind that view expressed by the applicant cannot really be disputed given the fact that the burden of overhead costs becomes greater when the level of activity falls. In other words it must be recognized that it is necessary to ensure in the elaboration of the quota system that where there is already an unusually low rate of utilization of capacity this must be taken into account in one way or another. Yet it is plain that this is precisely the function of the adjustment rule contained in Article 4 (3) according to which a rate of utilization which is below the average must be taken into consideration and, provided certain conditions are fulfilled, the reference production figures must be raised to a level which corresponds to a rate of utilization which lies five percentage points below that average rate in the other undertakings. (I shall shortly return to that rule.)

If that is borne in mind it mav hardlv be said that in elaborating Decision No 2794/80 the Commission totally overlooked the problem of employment and thus entirely neglected an important aim of the Treaty. On the other hand it is not possible to challenge the basic correctness of the Commission's approach of applying restrictive criteria in the formulation of the adjustment rule because the adjustment rules result in notional reference production figures. At all events I am not convinced that it is possible to contend that the provisions of the Treaty cited by the applicant demand much less emphasis on actual production and that the failure to introduce rules of the kind which the applicant believes to be necessary (basically increasing production capacity to the average level in the Community, irrespective of the reasons for which the utilization of capacity was below the average in the past) should be regarded as a misuse of powers in the sense which I described at the outset. As I obsened earlier, the Commission must also have regard in particular to the aims of economic policy mentioned in Article 2 of the ECSC Treaty.

To my mind it is plain, moreover, that the reference made at the hearing to Article 14 (b) of the quota rules now in force (Decision No 1831/81 of 24 June 1981 (Official Journal L 180 of 1: 7. 1981, p. 1) as amended bv Decision No 533/82 of 3 March 1982 (Official Journal L 65 of 9. 3. 1982, p. 6) does not require a different conclusion to be reached because the new provision is simply an equitable rule for smaller undertakings and not, on the other hand, a reflection and thus a recognition of the principle asserted by the applicant.

(dd)

If that is accepted, namely that the Commission was not in tact under a duty to ensure that all undertakings have a uniform minimum level of utilization, there is no need to examine the question of the correct figures to be taken for the applicant's present capacity (as we know, the applicant gives a figure of 459000 tonnes a month for its mill No 2, which the Commission disputes); nor is there any need at this stage to examine the question whether mill No 1, which the applicant shut down in 1974, ought to have been taken into account. Those and other related questions can only be dealt with in the review of the specific decision adopted in this particular case.

(aa)

First of all it is necessary to point out that from the applicant's written argument it was not quite clear whether it also complains that its mill No I in Bremen with a capacity of 169000 tonnes a month was not taken into account in the examination of the question of the utilization of capacity. Given the applicant's answer to a question put to it at the hearing we now know that it definitely takes the view that mill No 1 and its capacity ought to have been taken into account when Article 4 (3) of Decision No 2794/80 was applied.

This point of the applicant's argument obviously cannot be accepted. If under Article 4 (3) it is an undertaking's average rate of utilization in the period from July 1977 to June 1980 which is the crucial factor, that is to say a comparison of actual production with maximum possible production, then presumablyonly facilities which were at least partlv in operation in that period can be considered and not those, such as the applicant's mill No 1, which owing to the construction of a bigger and a more up-to-date mill was closed down and mothballed in 1974 and about which it cannot be said for certain even now whether it will ever be used again.

(bb)

Furthermore, the fact that the question of utilization is dealt with on the basis of maximum annual production possible within the meaning of Questionnaire 2-61 and that in this regard the Commission mainly relies on reports made by the undertakings themselves is in my view quite unobjectionable.

It is important to realize that Article 4 (3) of Decision No 2794/8C plays a pan in the context of restrictions of production undertaken with a view to adjustment to a changed market situation. In view of that the obvious and appropriate course was not to proceed on the basis of the theoretical concept of technical capacity but to select a yardstick which most closely reflects actual production. It is equally evident that the Commission relied mainly on the information supplied by the undenakings for reasons of practicability. It was not conceivable that given a quota system which was planned to be in force for a period of nine months and had to be implemented very' quickly the Commission should at great administrative expense carri out time-consuming ad hoc inquiries into the capacity and actual utilization of a large number of undertakings. This is so quite apart from the fact that it would be so extraordinarily difficult, if not impossible, to obtain in retrospect a reliable picture of undertakings' maximum possible production within the meaning of Questionnaire 2-61, which depends on all kinds of specific circumstances.

(cc)

Yet the information supplied in the questionnaires must certainly not be assumed to be absolutely binding in the sense that subsequent corrections are ruied out. The applicant contends that Article 47 of the ECSC Treaty provides for penalties for false statements irrespective of the reasons for which they were made. It would however be unreasonable to introduce additional penalties, so to speak, through the incorrect fixing of production quotas which could in certain circumstances, il one proceeds on the basis of the calculations made by the applicant, entail a considerable disadvantage. The question whether this argument is wholly convincing and whether the Commission is not entitled in principle to act on the basis of the figures of the undenakings concerned without this being regarded as an additional penalty can remain open. For it is clear that the Commission, too, has not ruled out the possibility of corrections. What is more, the Commission did in fact, as I mentioned, allow a correction to be made to the figures for the applicant's maximum possible production and afterwards altered the very first notification of the applicant's quota, which was for the founh quaner of 198C.

(dd)

So the question in this case comes down to whether the applicant was right to demand an even more substantial correction of the figure determined for its production capacity in 1977, 1978 and 1979. This raises in the first place the question whether any kind of time-limit must apply to such a demand and secondly the question whether the applicant was in fact able to adduce sufficiently firm evidence showing that even the Commission's altered figures for its capacity did not reflect the true situation in the reference period.

It is, however, difficult to accept that the applicant's conduct met those requirements. It is important to remember that it was apparent as early as the adoption of the quota system in October 1980 that for the purposes of Article 4 (3) utilization of capacity was the decisive factor. It is also important to remember that the Commission proceeded on the basis of a certain corrected maximum possible production figure for the applicant as regards the fourth quarter of 1980 (it did the same for the first two quarters of 1981). However, the applicant's response was merely to submit a new capacity repon on 1 January 1981 without giving any reason for it; a detailed explanation supported by technical experts' reports was not provided, however, until May 1981 when these proceedings were instituted. The applicant must in fact admit that its objections to the conduct of the performance test carried out at short notice and allegedly without time for preparation in May 1980 ought to have been made immediately. (It complains that the rolling programme carried out differed from normal conditions in various respects — a high proportion of thick metal, impossibility of composing the metal into convenient rolling lots and unusually large difference in thickness of the slabs.) The normal production conditions prevailing in May 1980 were not, however, those which mattered; consideration ought to have been given to what the rollins mill undergoing the test was capable ot producing under the production conditions prevailing in 1977, 1978 and 19SC.

The applicant mainly relies on an expert's repon of the Japanese Kawasaki Steel Corporation of May 1981 which was apparently prepared pursuant to an agreement between the applicant, the Commission and the German authorities as well as for the purposes of any market system which might be planned after expiry of the quota system. Admittedly it cannot be said of that repon, as the Commission does, that it merely proves theoretical assumptions about the maximum utilization of the plant. For the applicant stresses that it provided the expens with technical and operational data on the mill, the sizes of the slabs and coils and on its production programme so that they were definitely in a position to proceed on the basis of the specific production conditions at Bremen. However, the Commission rightly objects that, given the fact that the production programme may vary from month to month, it has not been demonstrated that the experts took a whole year's production programme as the basis for their report. With regard to the fact that the capacity was calculated for five modes of operation which varied according to the product mix and additional precautions the Commission further objects that the applicant has not demonstrated why the mode of operation which results in the figure which it uses (namely 487000 tonnes a month) should be the one to be taken into account. The Commission also points out that in the experts' ‘conclusions’ it is stated that this figure was determined on the basis of the information provided by the applicant on inter alia the capacity of its walking beam-type furnaces and that it represents the figure up to which output might be raised.

Secondly, considering that the applicant, which has stressed that the technical structure of the mill, which was completed in 1972, has not changed since 1977 (conversion to other sources of energy having been carried out before then), also had to admit that since then certain changes have taken place (alteration of the length of the slabs, increased use of heat), and bearing in mind that in an article on mill No 2 published in the periodical Stahl und Eisen in 1977 the applicant's technical director stated that it had a capacity of 310000 tonnes a month although it was possible, in particular after further enlargement of the walking beam-type. furnaces, to achieve 450000 to 500000 tonnes a month in the output stage, then there really seems to be no justification for regarding the Kawasaki report as containing any significant evidence proving that during the entire period of 1977 to 1980 the applicant's maximum possible production with mill No 2 had alwavs been of the order which it declared at the beginning of 1981.

In so far as the applicant further refers to an expert's report of 12 January 1982 which it submitted together with its answers to the Court's questions and which concerns a walking beam-type furnace's capacity on which the capacity of mill No 2 depends (according to the repon the capacity of the furnace was considerably higher than the figure quoted by the applicant itself and the figures which Kawasaki took as a basis for its report), it should be said that even if the report is to be regarded as constituting documentan evidence, there must be serious doubt in view of Article 42 of the Rules of Procedure whether it may be admitted as evidence after the written procedure has closed. Article 42 provides that as a rule evidence must be tendered in the application and defence and any subsequent indication of evidence must be justified. In that regard, the Commission's point that the test carried out for the purposes of the report lasted only 90 minutes and its objection based on a letter from the president of the Belgian Institute, the Cenfre des Recherches Métallurgiques, that permanent capacity cannot be proved by such tests certainly cannot be ignored. Nor should it be forgotten that the report is based on tests which took place in December 1981 and January 1982; therefore it is at best an indication of the applicant's present situation in various modes of operation but it does not prove that such output had always been possible in 1977, 1978 and 1980 under the range of production in operation at that time.

(a)

To begin with the applicant's line of argument, this is undoubtedly true of its reference to the Council's powers in the enactment of secondary Community law under the EEC Treaty in which the Council plays the main role, so to speak. That argument is of no assistance because the ECSC Treaty is clearly structured differently. Under that Treaty the Commission plainly bears the main responsibility for the drawing up of secondary Community law, which in view of the detailed form which the ECSC Treaty takes is less important in any case.

Similarly, the applicant's reference to German administrative law, according to which on the adoption of so called “mitwirkungsbedürftige Verwaltungsakte” [administrative acts requiring participation] assent is required to be given to fully-drafted legal instruments, provides no more assistance than its reference to German constitutional law under which, in so far as laws passed by the Bundestag need the assent of the Bundesrat, it is not sufficient for assent to be given to general intentions but it is presumed that a fully-drafted legal instrument exists. The. Commission argued first that, quite apart from the fact that those brief references, obviously to German law alone, are not likely to be of any assistance in identifying the outlines of a specific legal principle which also applies in Community law, there can certainly be no question of assent being given to every detail of a scheme if by administrative acts requiring participation the requirement for certain citizens to make a request is meant. Secondly, the Commission has rightly emphasized that as regards Articles 77 and 78 of the German Basic Law [Grundgesetz] it should not be forgotten that when the Bundesrat becomes involved in the legislative procedure laid down thereunder a decision approving a legislative text is already definitely in existence whereas the participation of the Council of Ministers under Article 58 plainly relates to planned measures.

Moreover, the applicant proceeds from the idea that the participation of the Council senes to strengthen the legitimacy of the Community's legal decisions. It believes that such legitimacy — in the sociological sense (inasmuch as the persons concerned are more prepared to accept official measures) — is not sufficiently guaranteed if the main responsibility for taking action lies with the Commission which is subject to only verv limited parliamentary control. As regards that argument the applicant must acknowledge not only that it is difficult to see how the participation of representatives of the governments in the Council (who after all have only indirect democratic legitimacy) is to have the effect which it describes: it is also important to remember that, should that effect actually exist, it is sufficiently guaranteed by the participation of the Council in the determination of the main features of a scheme, that is without giving its assent to even. single detail.

(b)

Secondly, a similar view may be taken of some of the considerations which the Commission has put forward to interpret Article 58.

I am thinking here of its reference to Article 14 of the ECSC Treaty from which the Commission says u may be inferred that it has a central role in the establishment of the secondary law of the Communitv. Nevertheless it should not be forgotten that Article 14 also contains the phrase “in accordance with the provisions of this Treaty”, thereby referring to other provisions of the Treaty. Accordingly only an analvsis of those provisions — in this case of Article 58 itself — can wholly show the extent to which other institutions must participate in the adoption of a decision.

I would add that it is difficult to prove by reference to the second subparagraph of Article 58 (1) that the Council's participation is limited to its giving its assent in principle to the introduction of a quota system. Just as on the application of that provision (under which the Council, acting unanimously, may direct that a quota system be introduced) further consideration of paragraph (1) as regards the consultation of the Consultative Committee appears absolutely essential, it may be entirely reasonable to consider that in addition to the Council's decision on the introduction in principle of a quota system, which must be adopted unanimously, a different form of assent of the Council, as provided for in paragraph (1), to the main details of the system is indispensable. Finally, the wording of the first subparagraph of Article 58 (1) supports that view and militates against too narrow a definition of the requirement of assent laid down in that provision, for the reference to the introduction of a “system” justifies consideration of the basic features of the scheme besides the question “whether” as a matter of principle it should be introduced.

(a)

On the first point I can be fairly brief. The question has already arisen in the same way in two other cases (Joined Cases 275/80 and 24/81 and Case 258/80 ( 6 ). Subsequent to the opinion of the Advocate General it was emphasized in those judgments that where an implementing decision is challenged objections to a general decision are admissible only if the general provision is applied in the contested individual decision, if the individual decision is based on the general provision and its legality depends on the general provision. As far as the notification of the production quotas and Article 7 (2) were concerned, such objections were reiecied on the ground that the notification did not in fact fix delivery quotas and Article 7 (2) is also applicable without an individual decision.

In my opinion the same determination should also be made here, especially since the applicant itself has stated thai the delivery quotas applying to it uiere based on the notification of the production quotas (and not the other way around) Moreover, it should not be overlooked that in the application the Court is only asked to declare the notification of 6 April 1981 void in so far as it fixes the applicant's reference production figures and production quotas for the rolled steel products in Group I; in other words the application does not refer to an instruction, also implicitly contained in the notification (because it results from the notification in conjunction with Article 7 (2)), as to the part of permitted production which the applicant could dispose of on the common market.

It must therefore be concluded in line with the Commission's view, that because a direct challenge on the basis of an allegation of a misuse of powers made pursuant to the second subparagraph of Article 33 of the ECSC Treaty has not been raised the applicant cannot raise objections to Article 7 (2) of Decision No 2794/80 until after a decision imposing sanctions has been adopted.

(b)

As regards the second point, which, in view of what has iust been said, is material only for the purposes of the argument relating to the restriction of exports, reference must be made to Article 42 (2) of the Rules of Procedure of the Court according to which no tresh issue may be raised in the course of proceedings unless it is based on matters of law or of fact which come to liqht in the course of the written procedure. Since that is not the case here, the principle according to which grounds of application not adduced until the reply is submitted and not even mentioned in the application are not admissible would appear in fact to come into play (that principle was mentioned in for instance. Cases 9/55 ( 7 ), 18/57 ( 8 ), in Joined Cases 27, 28 and 29/58 ( 9 ), Joined Cases 19, 21/60 and 2, 3/61 ( 10 ), 17 and 20/61 ( 11 ) and in Case 12/79 ( 12 )).

Admittedly that conclusion may not be free from doubt first because the complaint with which we are now concerned is based on an infringement of Article 58 and a number of complaints to that effect are already contained in the application. Secondly, an analysis of the relevant decisions of the Court shows that the principle just mentioned varies from case to case and that it is not. always applied with the same degree of strictness. For example, arguments adduced at a later stage were not considered inadmissible if they were arguments in support of submissions already made in the application (see for example the judgments in Cases 2/54 ( 13 ), 2/57 ( 14 ) and 18/60 ( 15 )) It is also noticeable that in this context the attitude adopted was not alwavs as strict as that taken in Case 18/57, joined Cases 19, 21/60 and 2, 3/61 or in the recent Case 11/81 ( 16 ). Without going into the details of the arguments, I am thinking here in particular of the situations which were discussed in Cases 2/56 ( 17 ) and 19/58 ( 18 ).

Moreover, since in Case 18/57 the Court considered that it should examine of its own motion the submission of insufficiency of reasons, which was to be regarded as having been made out of time, there may in fact be some hesitation in this case in contemplating a strict application of Article 42 of the Rules of Procedure and instead it may be considered justifiable not to regard the argument as to the restriction of expon opportunities as inadmissible.

(a)

First of all, reference may be made to the ludgmeni in Case 27b/80 ( 19 ), in which the same question was raised. In that case the Court resolved the question by explaining that the Commission had been prepared to have recourse to Article 14 of Decision No 2794/SC if undertakings' export opportunities were reduced by the quota svstem and bv pointing out that the applicant had not proved that the quota system had caused it to lose foreign markets.

In these proceedings the Commission has explained once again that in the second quarter of 1981 u drew attention, as it had done on previous occasions, to the fact that undenakings particularly interested in exponing could obtain a higher production quota on the basis of Article 14 of Decision No 2794/8C. We were also told that the applicant did not submit an application to that effect for the second quarter of 1981 because it considered it futile and its application for the first quarter of 1981 based on Article 14 was not granted because it was solely concerned with the question of the utilization of capacity. Moreover, since the applicant has not shown in these proceedings that it was actually prevented from exporting (the Court will recall that at the hearing the applicant was expressly asked whether it had been compelled to refuse export orders), this question can in fact be decided no differently than in Case 276/80.

(b)

In so far as the applicant in this case also complains that the Commission did not state the reasons for which it appeared to it to be necessary to extend Decision No 2794/80 to cover all exports, two further considerations provide an equally ready answer to' that complaint.

It is important to remember first that from the recitals in the preamble to the decision it is plain that there is a worldwide crisis because demand is declining everywhere. It is thus made clear that the repercussions which the quota system has on export opportunities may be entirely justified. Secondly, it is however above all clear that a production quota system, as applied here, must by its nature affect export opportunities and that existing export prospects can be taken into account only in individual cases by means of a special provision like Article 14 of the decision in question. Therefore justification for the quota system is automatically a sufficient justification for the effects which it may have on exports.