Case C-333/14, The Scotch Whisky Association – the market spirit for the spirit market [judgment 2015, ECLI:EU:C:2015:845]

The poor drink more, and are the source of much greater health-related and other harm than the middle class and the rich – at least, that was the gist of some of the evidence placed before the Scottish Parliament. The legislature’s response was to write an Act that would create a minimum price per unit of alcohol. But even before the Act could come into force, its legality had been challenged by the drinks industry which is claiming that the Scottish legislation is incompatible with EU law.

Facts
The Alcohol (Minimum Pricing) (Scotland) Act 2012 sought to create minimum unit pricing in the retail sale of alcoholic drinks in Scotland. By way of Ministerial Order, the price for a unit of alcohol was to be set at 50 pence.

However, before the Act could come into force its legality was challenged by: The Scotch Whisky Association; an EU-wide association of spirits makers; and an EU-wide lobby group for the wine trade. They claim that the Scottish Act is incompatible with both EU legislation and the EU Treaties.

Despite a myriad of arguments raised in the national courts, there are now two key areas of disagreement and legal uncertainty: (1) does the Scottish legislature enjoy sufficient competence to introduce the Act; and if so (2), is the Scottish legislation compatible with the EU principle of free movement because it falls within the health exception enshrined in Article 36 TFEU.

1) The Wines and Spirit Market
The claimants submit that when it comes to the organisation of the wines and spirits market, Scotland cannot introduce minimum pricing for a unit of alcohol. It has no competence to do so.

They say that although agriculture is a matter of shared competence between the EU and the Member States, once the EU has competence in a particular sector, competence is no longer shared. The EU has exercised its competence. Because of the common organisation of the market in wine, other fermented beverages, and agriculturally produced ethyl alcohol, this is an area which now falls within the exclusive competence of the EU. Thus, when it comes to wine, Regulation (EC) 1234/2007 leaves no room for national measures, especially when the common organisation of the wine market is organised along the principle of price being determined by market forces rather than by policy intervention.

The situation is no different when it comes to spirit drinks. The sector is governed by the EU’s Regulation (EC) No. 110/2008 on the definition, description, presentation, labelling and the protection of geographical indications of spirit drinks. And Article 6(2) of the Regulation expressly provides that:

Member States shall not prohibit or restrict the import, sale or consumption of spirit drinks which comply with this Regulation.

The claimants point out that since a minimum price for alcohol would have the effect of restricting imports of spirit drinks, the Act would contravene Article 6(2) of the Regulation. The claimants also claim that the Act would also be, in effect, a prohibition on sales below the minimum price, and that too would restrict the consumption of spirit drinks.

However, legal uncertainty surrounds whether the CJEU’s case law has been affected by the shared competence provisions in the Lisbon Treaty.

2) Free movement
The claimants submit that even if the Member State has a degree of competence, then the Act would still be contrary to the EU principle of free movement.

Article 34 TFEU enshrines the principle of free movement and requires Member States to prohibit: ‘Quantitative restrictions on imports and all measures having equivalent effect’.

The claimants claim that the Scottish legislation would have an equivalent effect to a quantitative restriction on imports. In that context, they recalled that even the proposed Scottish measures had already been sufficient to prompt the EU Commission into seeking out the views of the EU Member States. The result of the Commission’s ‘notification’ to the Member States under the Technical Standards Directive 98/34/EC was that no fewer than 11 Member States had expressed a view about the Scottish minimum unit price provisions, and no fewer than 9 had expressed their opposition to the provisions.

Indeed, the EU Commission had then gone on to issue an adverse opinion on the Scottish proposals. For even though the EU Commission accepted that alcohol caused a public health problem in Scotland; and while they recognised that a policy of increasing prices was likely to reduce consumption; the EU Commission believed that the aim of the policy could also be achieved by using excise duty as a way of increasing prices for all alcoholic products rather than just the cheap alcohol products which would be affected by the Scottish provisions. Indeed, the Commission thought that the use of excise duty would be a better way of achieving reduced levels of alcohol consumption since this method would also avoid any impediment to free movement.

The Scottish courts treated the EU Commission’s adverse opinion with respect and noted that it was not legally binding on the Scottish court. They also noted that the neither the Ministers nor the Scottish Parliament had any competence to increase excise duties.

Nevertheless, the referring court also noted that the legal representatives of the Scottish Ministers and legislature were now accepting that minimum unit pricing was a quantitative restriction but that the Ministers were denying any incompatibility with EU law. The legal bases for their denial were the public health and the prevention of public disorder exceptions which are listed in Article 36 TFEU. The Article provides:

The provisions of Articles 34 and 35 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants … Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Members States.

The legal uncertainty facing the referring Scottish court surrounds whether the Scottish legislation is a proportionate way of ensuring public health.

Questions Referred
The Questions are not yet published on the Curia’s website but copies of the judgments leading up to the reference from the Scottish Court of Session are available on the Internet.

Update – 13 September 2014
According to the Curia website, the Court of Session has asked:

“On a proper interpretation of EU law respecting the common organisation of the market in wine, in particular Regulation EU N° 1308/2013 […], is it lawful for a member state to promulgate a national measure which prescribes a minimum retail selling price for wine related to the quantity of alcohol in the sale product and which thus departs from the basis of free formation of price by market forces which otherwise underlies the market in wine?”

“In the context of a justification sought under article 36 TFEU, where – a member state has concluded that it is expedient in the interest of the protection of human health to increase the cost of consumption of a commodity – in casu alcoholic drinks – to consumers, or a section of those consumers; and that commodity is one in respect of which the member state is free to levy excise duties or other taxes (including taxes or duties based upon alcoholic content or volume or value or a mixture of such fiscal measures), is it permissible under EU law, and if so under what conditions, for a member state to reject such fiscal methods of increasing the price to the consumer in favour of legislative measures fixing minimum retail prices which distort intra EU trade and competition? ”

“Where a court in a member state is called upon to decide whether a legislative measure which constitutes a quantitative restriction on trade incompatible with article 34 TFEU may yet be justified under article 36 TFEU, on the grounds of the protection of human health, is that national court confined to examining only the information, evidence or other materials available to and considered by the legislator at the time at which the legislation was promulgated? And if not, what other restrictions might apply to the national court’s ability to consider all materials or evidence available and offered by the parties at the time of the decision of the national court?”

“Where a court in a member state is required, in its interpretation and application of EU law, to examine a contention by the national authorities that a measure otherwise constituting a quantitative restriction within the scope of article 34 TFEU is justified as a derogation, in the interests of the protection of human health, under article 36 TFEU, to what extent is the national court required, or entitled, to form – on the basis of the materials before it – an objective view of the effectiveness of the measure in achieving the aim which is claimed; the availability of at least equivalent alternative measures less disruptive of intra EU competition; and the general proportionality of the measure?”

“In considering (in the context of a dispute as to whether a measure is justified on grounds of the protection of human health under article 36 TFEU) the existence of an alternative measure, not disruptive, or at least less disruptive, of intra EU trade and competition, is it a legitimate ground for discarding that alternative measure that the effects of that alternative measure may not be precisely equivalent to the measure impugned under article 34 TFEU but may bring further, additional benefits and respond to a wider, general aim?”

“In assessing whether a national measure conceded, or found, to be a quantitative restriction in the sense of article 34 TFEU for which justification is sought under article 36 TFEU and in particular in assessing the proportionality of the measure, to what extent may a court charged with that function take into account its assessment of the nature and extent to which the measure offends as a quantitative restriction offensive to article 34?”