Livv
Décisions

CFI, president, June 15, 1994, No T-88/94 R

COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES

Order

PARTIES

Demandeur :

Société Commerciale des Potasses et de l'Azote, Entreprise minière et Chimique

Défendeur :

Commission of the European Communities

CFI n° T-88/94 R

15 juin 1994

THE PRESIDENT OF THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES

Facts and procedure

1 By application registered at the Registry of the Court of First Instance on 28 February 1994 Société Commerciale des Potasses et de l'Azote (hereinafter "SCPA") and Entreprise Minière et Chimique (hereinafter "EMC") brought an action under the fourth paragraph of Article 173 of the Treaty establishing the European Community (hereinafter "the EC Treaty") for the partial annulment of the Commission Decision of 14 December 1993 relating to a proceeding under Council Regulation (EEC) No 4064-89 of 21 December 1989 on the control of concentrations between undertakings (IV/M.308 - Kali+Salz/MdK/Treuhand).

2 In their application the applicants claim that the Court of First Instance should:

- declare Article 1 of the decision partially void in so far as it makes the declaring of the concentration compatible with the common market conditional upon compliance with the conditions set out in paragraph 63 of the decision;

- declare the decision partially void in so far as it has accepted the commitment mentioned in paragraph 65 of the decision whereby Kali und Salz AG ("K+S") undertook to modify the corporate structure of Potacan by 30 June 1994.

3 By a separate document received at the Registry of the Court of First Instance on the same day the applicants also sought, under Articles 185 and 186 of the EC Treaty:

- suspension of the operation of the contested decision in that it required K+S to sell shares and/or to withdraw from Kali-Export GmbH ("Kali -Export") and to terminate the contractual distribution relations binding it to SCPA;

- an order suspending the proceedings initiated by the Commission in Case IV/34.774 - Potacan.

4 On 23 March 1994 the Commission submitted its written observations on the application for interim measures. On 18 April 1994 the parties presented oral observations.

5 By an order of 10 May 1994, Société Commerciale des Potasses et de l'Azote and Entreprise Minière et Chimique v Commission (T-88-94 R [1994] ECR II-0000), the President of the Court of First Instance required the parties to forward to the Court within a period of two weeks the relevant information enabling it to ascertain whether and to what extent the commitment given by K+S and by the joint venture resulting from the merger of the potash and rock salt activities of K+S and Mitteldeutsche Kali AG ("MdK") to withdraw from Kali-Export would entail dissolution of the latter. By the same order, the President of the Court of First Instance suspended the operation of Article 1 of the Commission's decision of 14 December 1993, in so far as it might entail dissolution of Kali-Export, pending the order terminating the interim proceedings, and dismissed the remainder of the application for interim measures.

6 The Commission and the applicants forwarded the information requested to the Court by letters received at the Registry of the Court of First Instance on 20 May and 26 May 1994 respectively. In particular, they lodged Kali-Export's articles of association and a number of letters exchanged between K+S, on the one hand, and SCPA and the other partner in Kali-Export, Comercial de Potasas SA ("Coposa") of Spain, on the other.

7 Article XII of Kali-Export's articles of association reads as follows:

"Aufloesung und Liquidation der Gesellschaft

(1) Die Gesellschaft wird ausser aus den im Gesetz bestimmten Gruenden auch durch Kuendigung durch einen der Gesellschafter aufgeloest.

(2) Die Kuendigung ist jeweils zum Ende eines Geschaeftsjahres unter Einhaltung einer sechsmonatigen Kuendigungsfrist durch eingeschriebenen Brief an die Geschaeftsfuehrung zu erklaeren.

(3) Der (die) ordentliche(n) oder stellvertretende(n) Geschaeftsfuehrer ist (sind) verpflichtet, unverzueglich alle anderen Gesellschafter von der Aufkuendigung zu verstaendigen.

(4) Binnen sechzig Tagen nach Erhalt einer Kuendigung ist die Aufloesung und Liquidation der Gesellschaft zu beschliessen, falls nicht die uebrigen Gesellschafter innerhalb derselben Frist von sechzig Tagen die Fortsetzung der Gesellschaft unter UEbernahme des Geschaeftsanteiles des aufkuendigenden Gesellschafters im Verhaeltnis ihrer uebernommenen Stammeinlagen beschliessen.

(5) Zur Fortsetzung der Gesellschaft und UEbernahme des Geschaeftsanteiles sind nur jene Gesellschafter verpflichtet, die fuer die Fortsetzung gestimmt haben. Die anderen Gesellschafter werden als der Kuendigung beigetreten angesehen. Ihre Geschaeftsanteile sind ebenfalls von den fortsetzenden Gesellschaftern anteilsmaessig zu uebernehmen.

(6) Der Preis fuer die abgetretenen Geschaeftsanteile entspricht dem Buchwerte auf Grund der Jahresbilanz am Ende der Kuendigungsfrist und ist binnen sechs Monaten ab Ablauf der Kuendigungsfrist zur Zahlung faellig. ..."

("Dissolution and liquidation of the Company

(1) In addition to the causes specified by law, the Company shall also be dissolved by notice given by a shareholder.

(2) Notice shall be given in each case as of the end of the fiscal year by registered letter to the management with a term of notice of six months.

(3) The regular or Deputy Managing Director(s) shall notify all other shareholders of such notice.

(4) The dissolution and liquidation of the Company shall be resolved within sixty days after receipt of a notice of termination, unless the other shareholders resolve the continuation of the Company within the same term of sixty days by taking over simultaneously the shares of the shareholder who gave notice proportionally to their shares taken over.

(5) Only those shareholders shall be bound to continue the Company and to take over the shares who voted for the continuation. The other shareholders are considered as having joined the notice. Their shares shall also be taken over proportionally by the continuing shareholders.

(6) The price for the assigned shares shall correspond to the book value on the basis of the annual balance as of the end of the term of notice and shall fall due for payment within six months after the expiration of the term of notice.")

8 By letters of 16 February 1994, K+S offered its shares in Kali-Export to SCPA and Coposa. By a letter of 24 March 1994 K+S, not having received a positive response from either SCPA or Coposa, gave Kali-Export the notice provided for in Article XII of its articles of association, to take effect on 30 April 1995 at the latest.

9 Having noted the information provided by the parties pursuant to the aforementioned order of 10 May 1994, the judge hearing the application for interim measures considers he has sufficient information to rule on the validity of that application. Reference is made to the aforementioned order of the President of the Court of First Instance of 10 May 1994 for an account of the background to the dispute and of the pleas in law and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the judge hearing the application for interim measures.

Law

10 Under Articles 185 and 186 of the Treaty and Article 4 of Council Decision 88-591-ECSC, EEC, Euratom of 24 October 1988 establishing a Court of First Instance of the European Communities (OJ 1988 L 319, p. 1), as amended by Council Decision 93-350-Euratom, ECSC, EEC of 8 June 1993 (OJ 1993 L 144, p. 21), the Court of First Instance may, if it considers that circumstances so require, order that application of the contested act be suspended or prescribe any necessary interim measures.

11 Article 104 (2) of the Rules of Procedure of the Court of First Instance provides that applications for interim measures referred to in Articles 185 and 186 of the Treaty must state the circumstances giving rise to urgency and the pleas of fact and law establishing a prima facie case for the interim measures applied for. Such measures must be of an interim nature and must not prejudice the final judgment (see the order of the President of the Court of First Instance of 6 July 1993 in Case T-12-93 R CCE Vittel and CE Pierval v Commission [1993] ECR II-785).

Whether and to what extent the commitment by K+S and the joint venture to withdraw from Kali-Export will entail Kali-Export's dissolution

Arguments of the parties

12 In their observations submitted in response to the request for information contained in the aforementioned order of the President of the Court of First Instance of 10 May 1994, the applicants have argued that performance by K+S and the joint venture of the condition laid down in paragraph 63 of the contested decision necessarily implies, by virtue of Kali-Export's articles of association, the dissolution of Kali-Export. Not having taken up the offer made to them by K+S and the joint venture to sell their shareholdings, the two other partners in Kali -Export, namely SCPA and Coposa, are deemed to have joined in the notice. Since the four partners between them hold all the company's capital, the company must inevitably be dissolved and liquidated for lack of a shareholder able to continue the company.

13 The applicants emphasize, moreover, that, even if SCPA had intended to buy the shares of K+S and the joint venture, it would have been unable to continue the activities of the company on its own in the absence of a similar reaction from Coposa. In any case, budgetary and financial reasons would in practice make it impossible to continue Kali-Export after withdrawal of K+S and the joint venture, since the latter account for about 76% of the company's financing.

14 Finally, the applicants argue that, apart from the four undertakings currently partners in Kali-Export, there is no other potential candidate which would be likely to take the place of K+S and the joint venture. The only other producer in the European potash market, Cleveland Potash Ltd ("Cleveland"), itself withdrew from Kali-Export in 1988 in order to develop its own export policy.

15 For its part, the Commission considers that dissolution of Kali-Export cannot be regarded as an inevitable consequence of the decision by one or more of its shareholders to withdraw. In the Commission's opinion, it is clear from Article XII, paragraph (4), of Kali-Export's articles of association, cited above, that, if one or more shareholders withdraw, the others have the opportunity to continue the company by acquiring the shareholdings of those who have notified withdrawal. In the present case, both SCPA and Coposa had until about 25 May 1994 to notify whether they wished to avail themselves of that opportunity, which appears not to have been the case.

16 It follows, in the Commission's opinion, that, although the undertaking it has accepted contains the words "und damit die Gesellschaft aufzuloesen" ("and thus to dissolve the company"), in reality the withdrawal of K+S and the joint venture from Kali-Export does not automatically entail its dissolution. In the Commission's view, it is the other partners, including the applicants, who hold the company's future in their hands, since they have at their disposal ways of preventing the company from being dissolved. Therefore, in the absence of a causal link between the condition requiring withdrawal of K+S and the joint venture from Kali-Export and the possible dissolution of the latter, the disputed condition cannot be such as to give rise to a risk of serious and irreparable damage either to the applicants or to Kali-Export, which is, moreover, not a party to the proceedings.

Findings of the judge hearing the application for interim measures

17 It should be noted at the outset that, whilst Article XII of Kali-Export's articles of association, cited above, provides in paragraph (1) that the company is to be dissolved on notice given by one of its shareholders, the same Article XII provides in paragraph (4) that the other shareholders may decide to continue the company by acquiring the shares of the shareholder giving notice.

18 One cannot therefore conclude prima facie that withdrawal of one or more shareholders from Kali-Export necessarily entails dissolution of the company, since the other shareholders have the possibility of deciding to continue the company.

19 It is, however, necessary to determine, in the circumstances of the present case, whether the possibility of continuing the company is real or whether, on the other hand, it is purely hypothetical and the company must necessarily be dissolved.

20 In that regard, it must first be noted that K+S and the joint venture between them hold 50% of the shares in Kali-Export. According to the information received by the Court, neither of the two other partners, namely SCPA and Coposa, each of which holds 25% of Kali-Export's shares, wished to buy the shares in the company held by K+S and the joint venture. In accordance with Article XII, paragraph (5), of Kali-Export's articles of association, they are therefore deemed to have joined in the notice. In those circumstances, with no shareholder remaining in the company, the latter would necessarily be dissolved.

21 Secondly, it must be noted that, whilst SCPA and Coposa do indeed have the possibility of deciding to continue the company by taking over the shareholdings of K+S and the joint venture, that possibility appears to be purely theoretical in the present case. Even if SCPA had decided to take over the shareholdings, it would still have been necessary, to enable the company to continue to exist without being reduced to a single shareholder, for Coposa to have done the same. According to the information supplied to the Court that is not the case, since Coposa did not take up the offer by K+S and the joint venture to sell their shares.

22 Thirdly, the applicants have provided information which suggests prima facie that the structure of the market makes it very difficult, if not impossible, for other shareholders to take the place of K+S and the joint venture in Kali-Export. Apart from Coposa, there is only one other producer in the European potash market, namely Cleveland, which itself withdrew from Kali-Export in 1988 to develop its own export policy.

23 Finally, according to the information supplied to the Court by the applicants, K+S and MdK accounted for about 76% of the company's financing for the financial year which ended on 30 April 1993, which means that, without their participation, the functioning of Kali-Export would be seriously prejudiced.

24 From all those considerations it follows that the information filed by the parties suggests prima facie that withdrawal of K+S and the joint venture from Kali-Export, which the Commission made a condition of its declaration that the concentration was compatible with the common market, does in practice entail the dissolution of Kali-Export, since the other shareholders do not have any real possibility of avoiding such a dissolution following the withdrawal of the two main shareholders.

25 It is true that that situation is the direct result of Kali-Export's articles of association. Indeed, the applicants would face the same consequences if, independently of the existence of the contested decision, K+S and/or MdK had decided to withdraw from Kali-Export of their own volition. However, even if, as appears in paragraph 63 of the contested decision, K+S and the joint venture themselves undertook to the Commission to withdraw from Kali-Export, the fact remains that compliance with such a condition is a requirement of the contested decision.

26 It is in the light of those considerations that the judge hearing the application for interim measures must determine whether the legal conditions for granting those measures are met in the present case.

Whether a prima facie case has been established

27 It should be remembered that the applicants argue in their main action that the condition that K+S and the joint venture withdraw from Kali-Export is neither necessary nor appropriate to maintain effective competition within the meaning of Article 2(2) of Council Regulation (EEC) No 4064-89 of 21 December 1989 on the control of concentrations between undertakings (revised version in OJ 1990 L 257, p. 13), since cooperation within the framework of Kali-Export concerns only sales outside the European Community and cannot therefore have any effect on the competitive behaviour of its partners within the Community.

28 It is, however, outside the scope of these interim proceedings to examine such matters in depth. Moreover, one cannot exclude the possibility that the condition requiring K+S and the joint venture to withdraw from Kali-Export might injure the rights of third parties, in this case those of the two other partners in Kali-Export, including the applicant SCPA, which were not parties to the proceeding before the Commission. The question whether and to what extent the Commission may impose, in proceedings for controlling concentrations between undertakings, burdens and obligations which are likely to have a significant effect on the rights of third parties who are not party to the proceedings calls for detailed examination.

29 In those circumstances, the judge hearing the application for interim measures cannot regard the applicants'pleas as prima facie devoid of all foundation and thus dismiss the application for suspension of the operation of the contested decision, in so far as it requires K+S to sell its shares and/or to withdraw from Kali-Export (see in particular the order of the President of the Court of First Instance in Joined Cases T-7-93 R and T-9-93 R Langnese-Iglo and Schoeller v Commission [1993] ECR II-131).

The risk of serious and irreparable damage

30 It has been consistently held that the urgent nature of an application for interim measures must be determined with regard to the need to give an interim ruling in order to avoid serious and irreparable damage to the party requesting the interim measure. It is for the party requesting suspension of operation of the measure in question to adduce evidence that it cannot await the outcome of the main proceedings without having to suffer damage which would lead to serious and irreparable consequences for it (see the aforementioned order in CCE Vittel and CE Pierval v Commission).

31 In that respect, the President of the Court of First Instance ordered in the aforementioned order of 10 May that operation of Article 1 of the contested decision be suspended, in so far as it might entail dissolution of Kali-Export, pending an order terminating the interim proceedings and dismissed the remainder of the application for interim measures. The present order therefore concerns only the request that the Court of First Instance should order the Commission to suspend the operation of the contested decision inasmuch as it requires K+S to sell its shares and/or to withdraw from Kali-Export. Such a measure would effectively suspend the performance of one of the undertakings given by K+S and the joint venture to the Commission and thereby prolong a situation which, according to the contested decision, is likely to impede effective market competition.

32 Where there is such a situation of fact and law, the judge hearing the application for interim measures must balance the interests of the proper administration of justice against the interests of the parties, including the Commission's interest in re-establishing effective competition, so as to avoid both the creation of an irreversible situation and the occurrence of serious and irreparable damage to one of the parties to the dispute or to the public interest.

33 As a matter of principle, the dissolution of a company undeniably constitutes serious and irreparable damage for it. The same applies to its shareholders, especially if the company carries out the distribution of a significant part of their products and is their means of access to the international market. In this case, to challenge the distribution system which the partners in Kali-Export, including the applicant SCPA, have used for many years to sell their products in international markets would be likely to alter conditions of access to those markets in such a way as to make it very difficult, if not impossible, to re-establish them later, if the main action were to succeed (see the aforementioned order in Langnese-Iglo and Schoeller v Commission).

34 If, on the other hand, operation of the condition in the contested decision requiring K+S and the joint venture to withdraw from Kali-Export is suspended, those undertakings will not suffer any damage. They will be free to withdraw from Kali -Export or to remain there until the judgment of the Court of First Instance on the applicants'action. The only effect of suspending operation of the disputed condition would therefore be that, temporarily, the declaration of the notified concentration's compatibility with the common market would not be made subject to compliance with the condition that K+S and the joint venture withdraw from Kali-Export.

35 As for the Commission's interest in re-establishing effective market competition, it should be balanced against the interest of the two partners in Kali-Export, including the applicant, who are not parties to the concentration, in avoiding the occurrence of serious and irreparable damage, such as would follow from the dissolution of Kali-Export as a result of carrying out the obligation imposed by the contested decision.

36 It should be held in this connection that, by contrast with the dissolution of a company, which, as pointed out above, carries for its shareholders, and in this case for SCPA, the risk that conditions of access to the international market would be changed to such an extent as to make it very difficult, if not impossible, to re-establish them later if the main action were to succeed, the re-establishment of effective market competition is not jeopardized in this case by a temporary suspension of the condition imposed by the contested decision.

37 In those circumstances, and having regard to all the considerations set out above, suspension should be ordered of the operation of Article 1 of the Commission's decision of 14 December 1993, in so far as it requires K+S and the joint venture to withdraw from Kali-Export, until the Court of First Instance decides the main action.

On those grounds,

THE PRESIDENT OF THE COURT OF FIRST INSTANCE

hereby orders:

1. Operation of Article 1 of the Commission Decision of 14 December 1993 relating to a proceeding under Council Regulation (EEC) No 4064-89 of 21 December 1989 on the control of concentrations between undertakings (IV/M.308 - Kali+Salz/MdK/Treuhand) is suspended, in so far as it requires Kali+Salz and the joint venture to withdraw from Kali-Export, until the Court of First Instance delivers judgment in the main action.

2. Costs are reserved.