Summary
Parties
Grounds
Decision on costs
Operative part
Keywords
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1.Common commercial policy - Export restrictions - Arrangement between the Community and the United States of America concerning trade in steel pipes and tubes - Export licence arrangements - New producers - Concept - Right to be awarded an adequate share of the available export licences
( Council Regulation No 60/85, Art . 5(2 ) )
2.Common commercial policy - Export restrictions - Arrangement between the Community and the United States of America concerning trade in steel pipes and tubes - Export licence arrangements - Grant of licences - Special treatment accorded by a Member State to an undertaking due to its special situation - Permissibility
( Council Regulation No 60/85 )
Summary
1.Article 5 of Regulation No 60/85 on the restriction of exports of steel pipes and tubes to the United States of America must be interpreted as meaning that the expression "new producers of pipes and tubes" includes undertakings which have previously produced steel pipes and tubes but which, while maintaining their legal form and company name, undergo a change in economic terms which results in the construction of new facilities with a high production capacity, in particular when they are used to manufacture a new product which has not been previously manufactured by the undertaking .
An undertaking which is recognized as a "new producer" within the meaning of Article 5(2 ) of Regulation No 60/85 must be allowed an adequate share of the available export licences, having regard to the criteria contained in that provision . In particular, the authorities of the Member States given the task of determining the importance of each of the various criteria are required to take account of the production capacity of the new producer and its export potential and to afford it genuine access to the American pipes and tubes market .
2.Since the special situation of an undertaking established in a Member State was taken into account, owing to the fact that it supplied semi-finished products to its American subsidiary, both during the negotiations between the Community and the United States of America which preceded the conclusion of the arrangement concerning trade in steel pipes and tubes between the Community and that non-member country, in order to fix the Community export quota, and when the authorized export quota was shared out among the Member States, in order to fix the subquota of the Member State in which the undertaking is located, it must be concluded that, even though Regulation No 60/85 makes no reference to the special situation of the undertaking in question, it authorized the national authorities, but did not require them, to allocate to the undertaking in question a special quantity of pipes and tubes to be deducted from the national export quota, having regard to the criteria for allocation established in that regulation .
Parties
In Case 142/88
REFERENCE to the Court under Article 177 of the EEC Treaty by the Bundesverwaltungsgericht ( Federal Administrative Court ) for a preliminary ruling in the proceedings pending before that court between
( 1)Hoesch AG, Dortmund,
( 2 ) Federal Republic of Germany
and
Bergrohr GmbH, Herne,
on the interpretation of Regulation No 60/85 of the Council of 9 January 1985 on the restriction of exports of steel pipes and tubes to the United States of America ( Official Journal 1985, L 9, p . 13 ),
THE COURT ( Sixth Chamber )
composed of : C . N . Kakouris, President of Chamber, F . A . Schockweiler, T . Koopmans, G . F . Mancini and M . Díez de Velasco, Judges,
Advocate General : G . Tesauro
Registrar : B . Pastor, Administrator
after considering the observations submitted on behalf of
Bergrohr AG, plaintiff in the main proceedings, respondent and cross-appellant, by Mr Ehle, Rechtsanwalt, Cologne,
the Federal Republic of Germany, represented by the Bundesamt fuer Wirtschaft ( Federal Office for Economic Affairs ), defendant in the main proceedings, appellant, and respondent in the cross-appeal, by Mr Limberger, Rechtsanwalt, Frankfurt am Main,
Hoesch AG, intervener in the main proceedings, appellant, and respondent in the cross-appeal, by Mr Stockburger, Rechtsanwalt, Frankfurt am Main,
the Government of the Italian Republic, by Mr Ferrari Bravo, Head of the Department of Contentious Diplomatic Affairs at the Ministry of Foreign Affairs, acting as Agent, assisted by Mr Fiumara, avvocato dello Stato,
the Commission of the European Communities, by its Legal Advisers, Mr Waegenbaur and Mr De March, acting as Agents,
having regard to the Report for the Hearing and further to the hearing on 20 April 1989,
after hearing the Opinion of the Advocate General delivered at the sitting on 27 June 1989,
gives the following
Judgment
Grounds
1 By an order of 17 March 1988, which was received at the Court on 20 May 1988, the Bundesverwaltungsgericht referred to the Court of Justice under Article 177 of the EEC Treaty for a preliminary ruling a number of questions concerning the interpretation of Council Regulation No 60/85 of 9 January 1985 on the restriction of exports of steel pipes and tubes to the United States of America ( Official Journal 1985, L 9, p . 13 ).
2 Regulation No 60/85, cited above, concerns the implementation by the Community of an arrangement which the Community concluded in 1985, in the form of an exchange of letters, with the United States of America . Under that arrangement, exports to the United States of steel pipes and tubes originating in the Community are to be restricted to a certain level for a particular period of time ( Official Journal 1985, L 9, p . 2 ). According to the third recital in the preamble to Regulation No 60/85, for practical and management reasons, the quantitative export limits agreed by the Community must be allocated among the Member States . For that purpose, an allocation method was established; the authorities of the Member States were to share out the amounts allocated to them among undertakings in accordance with objective criteria .
3 The cause of the dispute in the main proceedings was an application by Bergrohr GmbH, a German undertaking which manufactures steel pipes and tubes, to be allowed to increase the maximum quantity of pipes and tubes which it could export, as part of the German quota, to the United States, on the ground that it had undergone an economic restructuring which involved, inter alia, the building of a new works, in collaboration with another steel company, in order to manufacture a new product, namely large-diameter tubes . That application was rejected by the competent German body, the Bundesamt fuer gewerbliche Wirtschaft ( Federal Office for Industrial Matters ), hereinafter referred to as "the Bundesamt ".
4 The Bundesamt based its decision on Article 5(2 ) of Regulation No 60/85, which lays down the criteria to be used by the authorities of the Member States for issuing export licences . Those criteria include, in particular, "compliance with the traditional export patterns of undertakings" taking account both of the reduction in the quantities exported under that regulation and "possibly the situation of new producers of pipes and tubes ". The Bundesamt took the view that Bergrohr was not a "new producer" within the meaning of Article 5(2 ) since, in its view, that term did not cover the creation of new production capacity by an undertaking which already manufactured pipes and tubes .
5 Bergrohr brought an action challenging the Bundesamt' s decision before the Verwaltungsgericht ( Administrative Court ) Frankfurt am Main, which upheld the Bundesamt' s arguments while at the same time taking the view that the Bundesamt ought to issue the additional export licences requested by Bergrohr and deduct the relevant amount from a special quantity of 20 000 tonnes allocated to Hoesch AG of Dortmund . That special quantity was reserved for Hoesch in order to enable it to supply semi-finished tubes to its subsidiary in Baytown, Texas, which then processed them into finished tubes . Consequently, the German quota, which was 2.82% of United States apparent consumption, was shared out among the undertakings concerned only after the special quantity reserved for Hoesch had been deducted . The Verwaltungsgericht considered that that practice was unlawful since there was no provision made for it in Regulation No 60/85 .
6 After having joined Hoesch as a party to the case, the Verwaltungsgerichtshof ( Higher Administrative Court ) Hessen, hearing the appeal, took the view that it was not unlawful to reserve the special quantity of 20 000 tonnes for Hoesch . In that regard, it based its decision on various documents which showed that the allocation of the special quantity to Hoesch had been agreed on during the negotiations between the Community and the United States . However, the Verwaltungsgerichtshof considered that Bergrohr was entitled to claim the status of a new producer within the meaning of Article 5(2 ) of Regulation No 60/85 and, consequently, to be granted an increase in the maximum quantity it could export to the United States .
7 The Bundesverwaltungsgericht, hearing appeals brought by Hoesch, Bergrohr and the Bundesamt, stayed the proceedings in order to refer the following questions to the Court of Justice for a preliminary ruling :
"( 1 ) ( a)Can the expression 'new producer of pipes and tubes' in Article 5(2 ) of Council Regulation ( EEC ) No 60/85 of 9 January 1985 ( Official Journal L 9, p . 13 ) also include undertakings which have previously produced pipes and tubes but which, while maintaining their legal form and name, undergo a significant change in economic and legal terms, inter alia by admitting a new shareholder, significantly increasing their capital and building a new works with high additional production capacity?
( b)If the answer to part ( a ) is in the affirmative : may recognition of such an undertaking as a new producer of pipes and tubes be refused on the ground that the circumstances justifying it were in existence long before export restrictions came into effect but were not used at that time for exports to the United States of America?
( c)If the answer to part ( b ) is in the negative : in what respects must account be taken of the 'situation' of such new producers of pipes and tubes in the context of the discretion granted to the national authorities by Article 5(2 ) of Regulation ( EEC ) No 60/85?
( 2)Can section II of the decision of the Council adopted by the written procedure on 29 December 1984 authorizing negotiations for an arrangement with the United States concerning the export of steel pipes and tubes on the basis of the instructions given in section I and the division of the overall quota of 7.6% of the American market in accordance with section II ( point 17 of the Council' s monthly list of acts adopted by the written procedure, December 1984 ), alone or together with Article 5(2 ) of Regulation ( EEC ) No 60/85, be interpreted as meaning that the Federal Republic of Germany was required or authorized to make a special allocation of 20 000 tonnes for 1985 and 1986 to a particular producer from its national export quota of 2.82%?"
8 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the course of the procedure and the written observations lodged at the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court .
The first question
9 The first two parts of the first question concern the criteria to be applied in order to determine whether an undertaking is a "new producer of pipes and tubes", while the third part seeks clarification of the criteria for issuing export licences which are to be applied when a new producer enters the market .
10 The dispute between the parties over the term "new producer" relates mainly to the question whether that term also covers the case of an undertaking which already manufactures pipes and tubes and which builds a new works, thereby increasing its production capacity considerably . Hoesch, the Bundesamt and the Italian Government have proposed that that question be answered in the negative on the ground that the main criterion for issuing licences laid down in Article 5 of Regulation No 60/85 is compliance with traditional export patterns . That criterion was, in their view, inspired by concern to conserve as far as possible, during the period in which exports to the United States are limited, the market shares of the various Community operators in the American market .
11 In that regard, it must be pointed out first of all that the arrangement between the Community and the United States implemented by Regulation No 60/85 seeks, in principle, to reduce to a particular level the total quantity of steel pipes and tubes originating in the Community and exported to the United States . That level is fixed by the arrangement at 7.6% of United States apparent consumption . On that basis, under Article 2 of Regulation No 60/85, the Commission calculates the Community export limits, which it adjusts if necessary to take account of changes in the United States apparent consumption . Under Article 3, the Commission allocates the quantitative export limits among the Member States in accordance with the shares laid down by Annex III to the regulation ( for Germany : 2.82% of United States consumption ).
12 It is within those limits that the Member States fix for each quarter the amounts for which they anticipate that export licences will be issued; in doing so, they are required to ensure an adequate spread of exports over the whole year ( Article 5(1 ) ). The licences are to be issued by the authorities of the Member States in accordance with certain criteria ( Article 5(2 ) ) which include in particular :
( a ) compliance with the traditional export patterns of undertakings taking account of the reduction principles established by the regulation and possibly the situation of new producers of pipes and tubes;
( b)compliance with the rates of exports to the United States as traditionally spread out over the year;
( c ) optimum use and administration of the export possibilities afforded by the regulation .
13 It is clear from the foregoing description of the scheme set up by Regulation No 60/85 that neither the objectives nor the wording of the regulation entitle undertakings which produce pipes and tubes to preserve their market shares within the Community quota . While compliance with traditional export patterns is one of the criteria which must be taken into account by the authorities of the Member States, it is only one of the factors used to make an assessment .
14 It must also be observed that the question asked does not concern a mere increase in production capacity but the building of a new works as the result of a significant restructuring of the undertaking involving, inter alia, the admission of a new shareholder and an appreciable increase in its capital . Moreover, the documents before the Court show that, in the main case, the construction of the new works enabled a new product which had not previously been manufactured by the undertaking in question to be made, namely large-diameter tubes .
15 Consequently, refusal to grant the status of new producer would, as Bergrohr and the Commission have pointed out, result in an unfair distinction between two forms of collaboration between two existing undertakings with the same economic result, namely the creation, for new pipe and tube production, of a subsidiary which must in any event be described as a "new producer" and the restructuring of one of the two undertakings, with the financial assistance of the other, comprising the building of a new works for the new production in question . No justification for such a distinction can be found either in the arrangement between Europe and the United States and Regulation No 60/85 or in the provisions and scheme of the EEC Treaty .
16 In view of the foregoing, the answer to the first part of the first question must be that Article 5 of Regulation No 60/85 is to be interpreted as meaning that the expression "new producers of pipes and tubes" includes undertakings which have previously produced pipes and tubes but which, while maintaining their legal form and company name, undergo a change in economic terms resulting in the construction of new facilities with a high production capacity, particularly when they are used to manufacture a new product which has not been manufactured by the undertaking previously .
17 With regard to the second part of the question, it is sufficient to observe that Article 5 of Regulation No 60/85 concerns the appearance of a new "producer" in the pipes and tubes market, irrespective of whether it is a new undertaking or, under certain conditions, a new facility of an existing undertaking . Article 5 does not concern the situation of an undertaking which, having produced pipes and tubes before Regulation No 60/85 entered into force, decides later to become involved in the export trade to the United States . However, it is clear that any new producer must be allowed a reasonable transition period in order to arrange for the exporting and marketing of its products .
18 The third part of the question relates to the criteria for allocation to be used when a new producer is entitled to claim licences for exporting pipes and tubes to the United States . The reply to that question must comply with the criteria set out in Article 5(2 ) of Regulation No 60/85, which are the only criteria laid down in that regulation .
19 In that regard, it must be pointed out that the Court has consistently held ( judgment of 17 March 1987 in Case 333/85 Mannesmann-Roehrenwerke v Council (( 1987 )) ECR 1381 ) that the authorities of the Member States must share out export licences among undertakings and, in doing so, must comply with the objective criteria laid down by Article 5(2 ), whose implementation involves the exercise of a certain discretion and whose significance must be determined having regard to the combination of different criteria .
20 A careful reading of the criteria shows, in particular, that when a new producer appears the national authorities must not only take into account its production capacity, its export potential and the voluntary restrictions which it has accepted, in the context of the reduction of the steel market, in relation to the corresponding situations of other undertakings, but also afford the new producer a real possibility of entering the American pipes and tubes market . It is for the national authorities to find the proper balance between those different requirements in each case .
21 Consequently, the final part of the reply to the first question must be that an undertaking which is recognized as a "new producer" within the meaning of Article 5(2 ) of Regulation No 60/85 must be allowed an adequate share of the available export licences, having regard to the criteria contained in that provision . In particular, the authorities of the Member States given the task of determining the importance of each of the various criteria are required to take account of the production capacity of the new producer and of its export potential and to afford it genuine access to the American pipes and tubes market .
The second question
22 The second question, which concerns the special quantity allocated in advance by the German authorities to Hoesch, raises in fact two distinct questions : whether the German authorities were required to deduct that special quantity from the national export quota and whether they had the power to do so .
23 In considering those two questions, it must be remembered first of all that supplies by Hoesch to its subsidiary in Baytown played an important role during the negotiations which led to the abovementioned arrangement between the Community and the United States . It is clear from an exchange of letters which appears in the documents before the Court that the American delegation originally insisted on restricting Community exports to 5.9% of United States apparent consumption and that it finally declared itself ready to raise that limit to 7.6% for the express purpose of ensuring that Hoesch' s American subsidiary would be supplied by its parent company . According to the American negotiators, that increase was calculated on the basis of deliveries of 42 000 tonnes of semi-finished tubes by Hoesch to its American subsidiary in Baytown .
24 It must also be pointed out that it is common ground that when the Council shared out the quota of 7.6% among the Member States in accordance with the basis for allocation established in Annex III to Regulation No 60/85, it took the view that a special quantity of 20 000 tonnes must be set aside for Hoesch to supply its American subsidiary . The quota for the Federal Republic of Germany was fixed at 2.82% in order to take account of that special quantity after the German Government had declared that it was ready, in order to find a common solution to the problems raised by the restrictions on exports of pipes and tubes, to deduct the special quantity reserved for Hoesch from the subquota allocated to German undertakings in accordance with the basis for allocation adopted by the Council .
25 It must be observed finally that in sharing out the Community quota among the Member States, Regulation No 60/85 makes no mention of the special quota reserved for Hoesch . It is clear from information supplied by the Commission and from a certain number of letters submitted to the Court by that institution and by Hoesch that the German Government stated that it was unhappy that there was no reference to the special quantity in the text of the Commission' s proposal which led to the adoption of the regulation in question . However, the Council did not amend the Commission' s proposal in that respect on the ground that the basis for allocation provided for already took account of the quantity of 20 000 tonnes reserved for Hoesch included in the German quota . After the entry into force of the arrangement and of Regulation No 60/85, the American authorities protested on a number of occasions about the lack of cooperation on the part of the Community with regard to the guarantee of supplies for Hoesch' s subsidiary in Baytown .
26 Those circumstances show that the American authorities agreed to a ceiling of 7.6% on the assumption that a special quantity would be reserved for Hoesch in order to supply its American subsidiary, whereas, when that quota was shared out, the Community institutions did not allocate a specific quantity to Hoesch . However, they did establish the basis for allocation among the Member States in such a way as to take account of the special quantity . In doing so they took the view that it was for the German authorities to act accordingly when they issued export licences .
27 Council Regulation ( EEC ) No 3686/87 of 8 December 1987 amending Regulation ( EEC ) No 60/85 on the restriction of exports of steel pipes and tubes to the United States of America ( Official Journal 1987, L 346, p . 26 ), added a new criterion for the issue of export licences according to which the national authorities must also take account of the "situation ... of undertakings having a subsidiary in the United States which they supply with semi-finished tubes for tube production ". However, that amendment, which refers in abstract terms to Hoesch' s special situation, was adopted after the circumstances which gave rise to the case in the main proceedings .
28 The Commission claimed that Regulation No 3686/87 did not seek to create a new legal situation but to codify a practice which had already been in force since the adoption of Regulation No 60/85 . According to the Commission, its provisions therefore enabled the original wording of Regulation No 60/85 to be clarified .
29 Consideration of those conflicting factors thus leads to the conclusion first of all that the provisions of Regulation No 60/85, in the version which was in force at the time, which were the only provisions to lay down the criteria to be used by the authorities of the Member States when issuing export licences for pipes and tubes, make no reference to the special quantity reserved for Hoesch . However, inasmuch as the allocation of those licences also concerned other undertakings whose special situation was not considered in the negotiations between the Community and the United States, those provisions cannot be interpreted as meaning that they must comprise an obligation for the German authorities to allocate a certain quantity to Hoesch .
30 However, account must be taken, secondly, of the nature of the arrangement between the Community and the United States . That arrangement, which was concluded on the basis of Article 113 of the EEC Treaty, constitutes an agreement within the meaning of Article 228 of the said Treaty . Such an agreement is characterized by the fact that its provisions are binding on the Community institutions and on the Member States pursuant to the Treaty and must be implemented in good faith in respect of the other contracting party in accordance with the applicable rules of public international law . It follows that it is for the German authorities to take into account, in the context of the criteria laid down by Article 5 of Regulation No 60/85, Hoesch' s special situation as referred to in the negotiations which resulted in the arrangement in question .
31 In that regard, it must be emphasized that the criteria at issue made express reference to the need to achieve "optimum use and administration of the export possibilities" afforded by the regulation . That optimum use and administration can be achieved in particular in the case of Community undertakings which have established economic links with their subsidiaries in the United States, in particular when those subsidiaries are supplied with semi-finished tubes by the Community undertakings in question, as is the case with the Hoesch undertakings in Texas and Germany . That also appears to be the view of the Council, which, in one of the recitals in the preamble to Regulation No 3686/87, observes that the allocation of the Community quota among the Member States, as set out in Annex III to Regulation No 60/85, "takes account of the special situation of ... undertakings with a subsidiary in the United States ".
32 The conclusion must be that the German authorities were authorized by Regulation No 60/85 to set aside a special quantity for Hoesch when issuing export licences and that they were also impelled to do so by the commitments which the Community undertook vis-à-vis the United States of America .
33 Consequently, the answer to the second question must be that Regulation No 60/85 authorized the German authorities, but did not require them, to allocate to Hoesch a special quantity of pipes and tubes to be deducted from the national export quota of 2.82% of United States apparent consumption .
Decision on costs
Costs
34 The costs incurred by the Italian Government and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable . Since these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court .
Operative part
On those grounds,
THE COURT ( Sixth Chamber ),
in answer to the questions referred to it by the Bundesverwaltungsgericht, by an order of 17 March 1988, hereby rules :
( 1 ) Article 5 of Council Regulation No 60/85 of 9 January 1985 on the restriction of exports of steel pipes and tubes to the United States of America must be interpreted as meaning that the expression "new producers of pipes and tubes" includes undertakings which have previously produced steel pipes and tubes but which, while maintaining their legal form and company name, undergo a change in economic terms which results in the construction of new facilities with a high production capacity, in particular when they are used to manufacture a new product which has not been previously manufactured by the undertaking .
( 2 ) An undertaking which is recognized as a "new producer" within the meaning of Article 5(2 ) of Regulation No 60/85 must be allowed an adequate share of the available export licences, having regard to the criteria contained in that provision . In particular, the authorities of the Member States given the task of determining the importance of each of the various criteria are required to take account of the production capacity of the new producer and its export potential and to afford it genuine access to the American pipes and tubes market .
( 3 ) Regulation No 60/85 authorized the German authorities, but did not require them, to allocate to Hoesch a special quantity of pipes and tubes to be deducted from the national export quota of 2.82% of United States apparent consumption .
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