MUP comment

24 Dec 2015

MUP PRELIMINARY RULING BY THE CJEU

Comment by David Frost, SWA CEO

The Court of Justice of the European Union (CJEU) ruled yesterday (23 December) on Scotland's proposed law on minimum unit pricing (MUP) of alcohol.  We welcome that ruling, which, put simply, says that MUP is contrary to EU law if less restrictive measures are available.  This is because the Court believes minimum pricing significantly restricts the market, impacting trade and competition.  

However, I want to give those interested in the issue a fuller view of how we got here, what the ruling says, and what conclusions we draw from it, as we move forward.

Story so far

But first, the story so far.  The Scottish Parliament passed the Alcohol (Minimum Pricing) (Scotland) Act in 2012, after prolonged discussion.  Parts of it entered into force on 29 June 2012.  The SWA and our co-plaintiffs applied for judicial review a month later, and the Scottish Government undertook not to bring the Act fully into force before the legal proceedings were concluded.

In September 2012 the European Commission issued a formal opinion on the Act, noting that in its view MUP could not be justified under the Treaty.  This did not prevent the Outer House of the Scottish Court of Session dismissing our judicial review application.  We appealed to the Inner House and in April 2014 the Inner House put the EU law issues to the European Court.  It is those issues on which the Court ruled yesterday.  The proceedings now come back to the Scottish courts for a ruling from the Inner House. 

The ruling

The ruling and the news release from the CJEU can be downloaded at the end of my article.

What follows is a summary of the key points, without going into detail on every aspect

The first set of questions (Questions 2 and 5 from the Inner House) ask whether, once a Member State has decided on a pricing measure to deal with the health consequences of alcohol consumption, it is allowed to choose MUP and to reject other measures which restrict trade and competition less.

These questions are at the heart of the case.  The Court notes first of all that a minimum price is clearly a restriction on trade because it potentially hinders the access to the UK market of alcoholic drinks that are lawfully marketed in other Member States.  (This was not in dispute.)   It notes that such measures can be justifiable under Article 36 of the Treaty, to protect health, provided they are appropriate and don't go beyond what is necessary.  The Court looks at the aim of the legislation and notes that it has a double objective, ie reducing, in a targeted way, both the consumption of alcohol by consumers whose consumption is hazardous or harmful, and also, generally, the population's consumption of alcohol.   The Court concludes that MUP is in principle an appropriate means of attaining these objectives.   But it notes that it would go beyond what is necessary if health could be protected by other, less trade-restrictive measures.  It notes that taxation on alcohol also constitutes an important and effective tool to protect public health, also allows prices of alcoholic drinks to be set at high levels, and is less restrictive of trade than MUP (since it does not constitute an obstacle to access to the UK market).  It notes that this is consistent with the Court's own case law on tobacco pricing. 

The Scottish Government had argued that the objective pursued could not be attained as effectively by taxation.  However, notes the Court, since increased taxation affects both moderate and hazardous/harmful drinkers, both of which are the targets of the measure, this does not appear to lead to the conclusion that taxation is less effective than MUP.  Indeed taxation provides additional benefits and is therefore a reason to prefer that measure.   However the Court notes that ultimately it is a judgement for the Scottish Court as to whether excise duty is more effective in protecting health and less restrictive of trade than MUP. 

In short, the Treaty "must be interpreted as precluding a Member State choosing… the option of [MUP] legislation and rejecting a measure, such as increased excise duties, that may be less restrictive of trade and competition within the European Union."
The second set of questions (4 and 6) ask whether and how national courts are allowed to assess the proportionality of MUP.  May they come to their own objective view of whether it meets its professed aims?  Does the degree of proportionality matter?

The Court notes that it must be for national authorities to demonstrate that their proposed legislation is proportionate, ie appropriate and not going beyond what is necessary.  A Member State must provide appropriate and specific evidence to that effect (without having to go so far as to prove positively that no other conceivable measure could suit).  The Scottish Court must therefore examine the evidence put forward by the Scottish Government, taking into account all relevant factors. 

Finally, question 3 asks whether a national Court allowed to look at all relevant evidence or only that available and considered at the time when the legislation was passed.
There was a disagreement between the SWA and the Scottish Government about what evidence the Scottish Court should consider and, in particular, whether it should look at new studies not available in 2012 when the legislation was passed. 

The European Court concluded that, since EU law must be complied with at all relevant times, the Scottish Court must assess the compatibility of that legislation with EU law on the date on which it gives its ruling, and that it must take into account any information of which it has knowledge - all the more so in cases like this one where there is scientific uncertainty as to the effects of the MUP measure.  In other words, all relevant evidence must be assessed.

One other question was relevant to wine producers only, because only for wine is there a set of rules laid down at EU level under the Common Agricultural Policy.  The Court was asked (Question 1) whether, given the existence of these EU rules, which appear to assume prices will be formed freely in the market, it was in order for a Member State to introduce a minimum price for wine. 

The Court answered straightforwardly that the answer is yes in principle, though the minimum pricing policy must then pass all the other tests above. 

Conclusions

What conclusions can be drawn from this ruling?

First, that the European Court has reaffirmed its previous rulings against minimum pricing, and confirmed that the principles it expressed in those rulings also apply to the trade in alcoholic drinks.  This reconfirmation of its rulings was to be expected in an area of law so fundamental to the effective working of the single market.

Second, that it is likely to be difficult for the Scottish Government to prove before the Court of Session that MUP will achieve its aims.  The statistics and research show that most hazardous and harmful drinkers are in the upper income groups and are unaffected by minimum pricing.  (The Scottish Government sought to exclude some of the evidence of the lack of effectiveness of the measure because it post-dated consideration of the measure in Parliament, but has been overruled on this point by the Court.)

Third, even if the Scottish Government could prove this, MUP is still illegal if there are alternative, less trade restrictive, means of achieving those aims - which there are. The Court itself suggests that increased taxation is more likely to achieve the aims, and indeed the UK Government (which is also a party to the case) has already said that a duty increase could give "the same positive effect on consumption, health and crime" as MUP.  The European Court also indicated that the Scottish Court must explicitly assess the nature of the restriction on the free movement of goods caused by MUP, by comparison with the alternatives.  If such an assessment was ever made by the Scottish Government, it has not been made public. 

In summary, when the issue returns to the Scottish Court early next year, the onus is now on the Scottish Government to satisfy the tests which the CJEU has set out. It is clear that it has not done so to date, and we believe that it is very unlikely that it will be able to do so in the future.

Finally, looking forward and beyond the specific issue of Minimum Unit Pricing, it is regrettable how polarised the debate on alcohol has become. I believe that it is important to focus on the common goal of reducing alcohol related harm.  The fact that alcohol-related deaths have fallen by a third over the last decade in Scotland suggests we are on the right path.  But there is clearly more to do and we need to create a more collaborative dialogue on tackling the problem.  The Scotch Whisky industry remains committed to tackling alcohol misuse in partnership with government and others, building on the good work already being undertaken, and starting with alternative, more effective and legal ways than MUP to do this.  I personally am committed to making sure this happens.



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