Professional briefing - The Journal Online

decisive question is whether the
measures at issue are necessary to
achieve [the protection of public
health] or whether there are
equally suitable, but less restrictive,
alternatives”; and “it must be
recognised that the member state
can determine the level at which it
would like to protect public health
and how that level is to be achieved.
In that respect member states enjoy
considerable discretion”. She
nonetheless concluded that the court
should decide that:
“by maintaining in force a system
of minimum prices for cigarettes...
and a prohibition on selling tobacco
products at a promotional price
which is contrary to public health
objectives, the French Republic has
failed to fulfil its obligations under
[the Tobacco Duties Directive]”;
“by enacting and retaining legal
provisions under which minimum
selling prices for cigarettes and for
fine-cut tobacco for the rolling of
cigarettes are set by the state, the
Republic of Austria has failed to fulfil
its obligations under [the Tobacco
Duties Directive]”; and
“by imposing minimum retail
prices for cigarettes, Ireland has failed
to fulfil its obligations under [the
Tobacco Duties Directive]”.
The opinion is about the Tobacco
Duty Directive 95/59/EC. The structure
for duty on tobacco is significantly
different from that for alcoholic
beverages under the Alcohol Duty
Directive 92/83/EEC. Tobacco duty is a
function of the maximum retail price
of tobacco, a maximum which the
directive requires the manufacturers to
be free to set. Alcohol duty is based on
volume of alcohol, not price.
Interference with pricing of alcohol
may not be as destabilising for the
duty regime as in the case of tobacco.
It should not be assumed that
observations about the effect of
harmonisation of the structure of
tobacco duty are entirely transferable
to the harmonisation of the structure
of alcohol duty. It is, however, true that
in relation to alcohol, as to tobacco,
the legal issues concern not only free
movement but also compatibility with
the duty directives.
Case law issues
The earlier case law seemed to suggest
that, as a matter of free movement, a
ban on loss leading was not a measure
falling under article 34 and so did not
need to be justified under article 36.
The AG’s opinion can be read as
compatible with that view and as
condemning the bans only because of
www.lawscotjobs.co.uk
fyi
So far as EU law
is concerned, it is
necessary to ignore
any devolution issues
as entirely an internal
UK matter
their alleged interference with the
structure of tobacco duty. Whether the
court will agree that harmonisation of
duty structures necessarily renders an
article 36 defence irrelevant remains
to be seen. The free movement cases
have not been as tolerant of
minimum pricing as of restrictions on
promotion, but we should be wary of
treating past applications of a
principle as though they amounted to
a self-standing rule of law.
The issues that emerge from the
relevant case law on free movement
are most easily expressed as a set of
layered questions, each applied to
each of the proposals:
is it a “measure having equivalent
effect” to a “quantitative restriction
on imports”;
if so, is it capable of being “justified
on grounds of public... policy or public
security; the protection of health and
life of humans”, while not constituting
“a means of arbitrary discrimination or
a disguised restriction on trade between
Member States”;
if so, does it operate as a restriction
only to an extent that is proportionate
to the legitimate objective pursued
(put differently, is it really impossible
to achieve the objective in a way that
causes less disruption or disadvantage
to trade in imported products)?
Basically, one would expect an EU
law challenge to amount essentially to
a “Yes” to the first question, followed
by “No” and “No, anyway”. Conversely
the expected defence for promotion
restrictions might amount to
responding “No” to the first question,
on the grounds that they are “national
provisions restricting or prohibiting
certain selling arrangements” that
“apply to all relevant traders operating
within the national territory and...
affect in the same manner, in law and
in fact, the marketing of domestic
products and of those from other
member states”. For minimum pricing
the defence response might be
“Maybe” or “Yes”, followed by “Yes”
and “Yes” to the other questions.
Battle lines
The challenge to minimum pricing
would be likely to be argued along
the following lines:
that minimum pricing reduces the
price advantage of non-premium
products over premium products;
that this is a “measure having
equivalent effect” to a “quantitative
restriction on imports”;
that the effect of deterring
consumption by increasing the cost of
alcoholic drink could be achieved
with less or no impediment to
imports simply by increasing duty
across the board (the European
Commission’s view);
that even if minimum pricing were
acceptable, it should be fixed by
reference to volume rather than the
British “unit”;
that the reservation to Westminster
of the fixing of duty rates is an internal
UK matter and consequently not
pleadable at EU level as a justification
for not having taken that course; and
that the minimum pricing
therefore fails the “proportionality”
test and is consequently not saved by
article 36.
The rejoinder might need to be to
the following effect:
admitted that the proposed
minimum pricing legislation may well
be a measure having equivalent effect;
the health and public order issue is
not simply “people drink too much
alcohol”, but “there is credible
evidence that certain identified
health and public order problems are
attributable (to a significant extent) to
certain identified patterns of
purchase of alcohol”;
the proposed minimum pricing
legislation is a fine-tuned measure
that precisely targets those patterns
and there is credible evidence that it
will disrupt them and thereby
diminish the incidence of the
identified health and public order
problems; it treats equally all types of
alcoholic drink, beers, wines, spirits
and “tonic wines”;
the “unit” (expected to be defined
in the pricing order as 10 millilitres of
ethyl alcohol) is a simple volume
measure with an objective scientific
basis, being (in that case) the amount
that the human body can break down
in one hour;
in all the circumstances the
proposed minimum pricing
legislation is, if anything, a less
disproportionate response to the
identified problem than would be an
across-the-board increase in duty.
This would be a novel health and
economic analysis to present to the
Court of Justice and would take it
into uncharted waters.
The assembling of evidence of
harm attributable to misuse of
alcohol is not the end but only the
beginning of the task that lies ahead
for the Scottish Government. The bill
takes the form of an enabling Act.
This will gives interested parties
adequate opportunity, if they wish, to
take legal action to try to prevent the
making of the enabled orders.
James McLean, Burness LLP
December 09 theJournal / 19