The applicant claims that the wording of Article 58 (1) and Article 74 of the Treaty is sufficient to show that any application of Article 58 must necessarily be accompanied by a consideration of the need for the measures provided for in Article 74, and that that consideration must be followed bv a decision either to apply or not to apply Article 74 according to the need thus established.

Since there is no mention whatsoever to the effect that such an examination was conducted or of the reasons for the conclusions to which it led, the statement of the reasons for applying Article 58 is inadequate.

Since it was undoubtedly necessary to adopt the measures provided for in Article 74, the failure to do so constitutes an infringement of those two anides. The Commission's exercise of its discretion is subject to review by the Court.

The Commission contends that although in the case of measures adopted under Article 74 (3) the statement of reasons must indicate that the conditions laid down in Article 58 are satisfied, Article 58 contains no such reference to the existence of the conditions provided for in Article 74 and there was therefore no need to refer to Article 74 in the statement of reasons for Decision No 2794/80/ECSC, which was adopted pursuant to Article 58.

The Commission refers to the measures which it has adopted in relation to imports from nonmember countries, such as antidumping provisions, a system of Community controls and arrangements with a number of nonmember countries.

It is anxious to emphasize that the decision as to the extent to which it is necessary to adopt measures under Article 74 is a question of policy. The soundness of the Commission's choice of policy was demonstrated by a reduction in the level of imports. The complaint directed at the Commission is one which may be raised only in an action for failure to act.

The applicant replies that the Commission may not apply Article 58 without considering the need for measures to be adopted under Article 74: if it failed to consider the point it infringed Article 58; if it did not state in its decision that it had considered that point it failed to fulfil its obligation to state reasons. The obligation to state reasons is interpreted strictly by the Court precisely because the assessment of the situation is in part discretionary and thus escapes to some extent judicial review. The obligation exists regardless of whether the decision is to apply the provisions or not to apply them. The explanations supplied by the Commission to the Court ought to have been given as the statement of reasons for the decision.

The Commission replies that the applicant has failed to show that measures other than those adopted were necessary. Even if it had, such a matter could only be considered in an action for failure to act on the part of a Community institution.

Consideration of whether the adoption of measures under Article 74 is necessary is not a prerequisite to the taking of action by the Commission under Article 58; nor is it one of the elements of fact constituting the legal basis for Decision No 2794/80/ECSC, nor one of the considerations which led to its adoption by the Commission . Therefore there was no need to refer to it in the statement of the reasons on which that decision was based.

The applicant maintains that the quotas were not established on an equitable basis, taking account of the principles set out in Anieles 2, 3 and 4 of the Treaty, as provided for in Article 58(2): the provisions contained in Article 4 (3) of Decision No 2794/80/ECSC are discriminatory if they do not apply to undertakings whose voluntary production programmes could not be calculated taking 1974 as a basis because their facilities were of more recent date (the so-called new undertakings). Similarly Article 14 creates discrimination between viable undertakings and others. Moreover, the fixing of quotas for such undertakings on the basis of actual production during the reference period rather than on the basis of capacity must inevitably lead to discrimination.

The Commission contends that the basis on which the quotas were established — the reference production for each undertaking — was an equitable one. To that basic system are added the provisions of Article 4 (3), (4) and (5), the last subparagraph of Article 5 (2) and Article 14.

Article 4 (3), which enables the reference production to be adjusted, was introduced in order to avoid any injustice which might be incurred, owing to the adoption of the three-year period in Article 4 (1), solely by certain undertakings which had participated in the voluntary delivery programmes and which satisfied certain other conditions.

Since the applicant did not satisfy all the conditions which had been laid down (as was stated in the first paragraph of the preamble to the decision of 24 February 1981), although it had participated in those programmes, there was no reason to allow it an adjustment under Article 4 (3). However, no discrimination was thereby created, either against new undertakings or against any other undertaking which did not fulfil the conditions laid down in that paragraph, as there was no different treatment of undertakings which were in similar situations. The treatment differed only inasmuch as the situations of the undertakings differed, and it was therefore wholly justified.

Article 14 enables the disproportionate losses which certain undertakings may have had to suffer as a result of the application of the general provisions of Decision No 2794/80 to be mitigated. The provision is in no way discriminatory since any undertaking experiencing exceptional difficulties may have its quotas adjusted on that ground. If some undertakings do not experience such difficulties but remain viable there is no reason to allow them an adjustment under that aniele; in any case, it must be reiterated that the exclusion of an undertaking from the benefit of that aniele does not constitute different treatment of similar cases, but different treatment of different cases.

The Commission does not share the view that it is discriminatory to base calculation on actual production rather than production capacity.

Actual production is an objective, precise and measurable criterion, whereas capacity is a less specific concept and -its application as the criterion, in preference to actual production, might give rise to injustice.

Furthermore, to calculate the quotas on the basis of the capacity of the undertakings would inevitably penalize those which have a very high rate of utilization as a result of efficient management and would confer an unfair advantage on those with a low rate of utilization.

Article 4 (3) seeks to rectify an injustice whereby a disadvantage would have been suffered by undertakings which, having agreed to take part in voluntary programmes restricting deliveries based on deliveries in 1974, had not yet that year brought their new plant into operation.

New undertakings, such as the applicant, which are not covered by Article 4 (3) may however take advantage of other provisions of Decision No 2794/80/ECSC which are also designed to ensure equal treatment, such as Article 14. The applicant's problem was different to that envisaged by Article 4 (3), namely a utilization rate so low that it created exceptional difficulties for it within the meaning of Article 14. The decision or 24 February 1981 recognized thai circumstance.

The applicant replies that the quoti system requires undertakings to sai rifu r some of their production capacitv Such a sacrifice must be shared on an equitable basis by using exm.nj production capacity as a reference

The Commission's argumeni that capacity is a vague concept which %ouid give rise to considerable difficult in application does not bear scrutin

The Commission itself resorted to that concept for its own programmes, for instance the quarterly estimated programmes, and for the application of the system of voluntary reduction programmes to undertakings which were not producing in 1974. Production capacity should not prove more difficult to ascertain than actual production.

Moreover, it was not the undertakings with modern plant and efficient management which were exploiting their capacity to the full but those with outmoded, labour-intensive plant and the benefit of government subsidies. Those undertakings, held out as good examples by the Commission, were in reality responsible for the deteriorating conditions in the steel industry.

The applicant complains that the reference system creates injustices, the most patent of which is the penalization of undertakings having a very low rate of utilization of their capacity.

Article 4 (3) could have corrected the injustice but three conditions were inserted into it the sole aim of which was to confer an advantage on certain undertakings for which the provision was tailor-made.

Taken as a whole, the conditions reveal a particularly serious lacuna in the case of undertakings which had progressively introduced new plant after 1974 but before 1 July 1978 and which, moreover, as a result of that, had a smaller period of reference and found themselves deprived of the possibility of choosing the month in which production was highest.

The Commission insists that the sacrifice required by the quota system is a reduction in each undertaking's production compared with its previous production so as to adjust Community production to the reduced demand. Actual production, which is represented by tangible objects, is less difficult to ascertain than production capacity.

The Commission explains how it relied on the notion of capacity in limited circumstances in the past. It is preferable to use information on actual production or actual deliveries where it is available.

The applicant's delivery programmes were based on a presumed gradual increase in the utilization of its capacity until full utilization, which was expected to be achieved by the last quarter of 1979. The applicant's deliveries in 1979 and the first half of 1980 amounted to no more than about 50 % of what it could have delivered.

As far as undertakings working at full capacity are concerned, the Commission considers that the more plausible view is that they are doing so because they manufacture a sufficiently wide range of products which are of the quality required by users and were adapted in time to changing market trends.

The applicant objects to the fact that relief under Article 4 (3) is tied to the undertaking's participation on a voluntary programme to reduce production. The result is to confer ex post facto a binding character on measures which were not binding and could not be so, thus offending against the principle nulla poena sine lege.

The Commission replies that confining the benefit of Article 4 (3) to certain undertakings which are the victims of an injustice does not amount to a sanction applied against other undertakings. Since there was no sanction there was no breach of the principle nulla poena sine lége. The Commission is unable to see how the provision in question infringes the fourth and fifth paragraphs of Article 14 of the ECSC Treaty.

The applicant replies that the breach lies in haying conferred a binding character on measures which were not binding. Contrary to the rule that opinions are not binding and that measures involving a legal obligation must be adopted in a particular form, the Commission transformed, ex post facto, into binding decisions with obligatory consequences acts which were not binding, namely the unfavourable opinion (Article 4 (4) of Decision No 2794/80) and the delivery programme (Article 4 (3)).

The principle that legitimate expectations must be protected has been breached. Undertakings cannot expect the administration to impose subsequently penalties for failure to comply with a set of rules which were represented as having no binding effect.

The Commission considers that the submission concerning breach of the fundamental principle that legitimate expectations must be protected is unfounded. The delivery programmes were not compulsory. If an undertaking chose to ignore an unfavourable opinion of the Commission on an investment it accepted the risks which it might indirectly incur as a result of a situation which it had itself helped to create. The fact that the Commission takes account of that and decides to ignore the resulting increase in capacity in no way amounts to the imposition of a penalty connected to a measure which is without binding force.