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Scotch Whiskey v Lord Advocate: A Neat Solution or The Law on the Rocks?

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About The Author

Ming Lu Ang (Regular Writer)

Ming is a second-year law student at the University of Birmingham. Through writing for Keep Calm Talk Law, she hopes to further her understanding in various areas of law and be kept up to date with the latest legal and commercial developments. Outside the law, she enjoys foreign language dramas and sketching.

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The proposed comparison is, in the present case, between two essentially incomparable values. One is the value of health... The other is the market and economic impact on producers, wholesalers and retailers of alcoholic drinks across the European Union.

Lord Mance

The Supreme Court's judgment in Scotch Whisky Association v Lord Advocate [2017] arrived at a timely period, as EU Member States are increasingly rolling out new policies which target ‘lifestyle risk factors’, such as harmful alcohol consumption, tobacco use and unhealthy diets. The case represented an important reminder that when implementing these policies, Member States must take into account one of the EU’s four fundamental freedoms: the free movement of goods.

In Scotch Whisky Association [2017], the Scottish government attempted to introduce a minimum sale price for alcoholic drinks (the Measure), under the Alcohol (Minimum Pricing) (Scotland) Act 2012 (the A(MPS)A 2012), as part of a comprehensive public health strategy aimed at reducing alcohol related harms. This type of measure  has the potential to come into conflict with the ‘open and undistorted competition’ guaranteed by the EU’s free movement provisions, unraveling the tensions between supranational and national controls, market and non-market objectives. To defend the A(MPS)A 2012's derogation from the free movement of goods guaranteed under Article 34 of the Treaty on the Functioning of the European Union (the TFEU), the Scottish government raised public health concerns under Article 36 of the TFEU

The Supreme Court unanimously upheld the legality of the A(MPS)A 2012. However, this came at the cost of neglecting urgent but (arguably) poorly-considered concerns that had been identified by the European Court of Justice (ECJ) in its Preliminary Ruling in Scotch Whiskey Association v Lord Advocate [2015] relating to the perceived necessity of the Measure: namely (i) the scope of the free movement of goods prohibition, (ii) the approach to proportionality under EU law and (iii) the application and implications of EU law within devolved legislatures.

On these concerns, this article argues that a potential solution lies not in making it more difficult for Member States to seek derogations from Article 34 of the TFEU; instead, it lies in reconsidering the ambit of a restriction under Article 34 of the TFEU.

The Factual Background

The A(MPS)A 2012 was passed by the Scottish Parliament as part of the government’s campaign to reduce alcohol consumption and related harm. This legislation introduced a minimum price per unit of alcohol (MPU), due to evidence linking affordability with higher consumption, which in turn leads to increased harm. Furthermore, the A(MPS)A 2012 contains a ‘sunset’ clause, giving the MPU scheme a mandate of six years, unless the Scottish Parliament approves an extension.  

The Scotch Whisky Association, and other applicants representing the alcoholic drinks industry, brought judicial review proceedings challenging the validity of the Measure, alleging a conflict with European Union law. The case reached the Inner House of the Court of Session – the supreme civil court in Scotland – which requested a Preliminary Reference under Article 267 of the TFEU, asking the ECJ to clarify whether EU law did in fact block the implementation of the Measure.

The Legal Background

Article 34 of the TFEU provides that:

[Q]uantitative restrictions on imports and all measures having equivalent effect shall be prohibited between member states.

Neither party before the Court of Session disputed that the A(MPS)A 2012's MPU scheme fell under the ambit of Article 34 of the TFEU. Instead, the key debate was whether it was open the Scottish Government to justify the Measure on grounds of protection of public health, as provided for under Article 36 of the TFEU.

To justify a measure equivalent to a quantitative restriction under Article 36 of the TFEU, the Member State must prove the measure:

  1. falls under the list of exceptions provided for in the Article;
  2. must not be a veiled attempt to restrict trade; and
  3. must be proportionate to the objective sought.

The Scotch Whiskey Association did not argue that the A(MPS)A 2012 was a disguised restriction on trade and that it did not satisfy the objective of protecting public health. Instead, it contended that - and thus the core question for the courts was whether - the Measure was proportionate.

The Decisions

Decision One: The ECJ

The ECJ usually determines the issue of proportionality in two steps. Firstly, it assesses whether or not the disputed measure in question is relevant to attaining the objective sought.  Subsequently, it conducts a necessity test: does the disputed measure go no further than what is necessary to achieving its objective?

In his advisory Opinion on the case, Advocate Generale Bot attempted to introduce a proportionality test that diverged from this approach. He contended that the ECJ’s second step should be further divided into two parts:

  • identifying potential alternatives that achieve the same policy objectives as the measure in question; and
  • balancing free movement of goods and the contribution which that measure could secure for the protection of the objective pursued.

However, Advocate Generale Bot’s new proposed approach was not endorsed by the ECJ in its judgment in Scotch Whiskey Association [2015]. This was noted by the Supreme Court in Scotch Whisky Association [2017], with Lord Mance seeking to provide a rationale for the ECJ's decision when he explained that:  

[O]ne may surmise that the Court of Justice intended at the very least to signal the appropriateness of an even greater level of restraint and respect for national authorities’ choice of measures to protect health than that which Advocate General Bot himself recognised under the third stage test which he identified.

This argument does carry some wait: in certain circumstances, the ECJ's approach in Scotch Whiskey Association [2015] may ensure that the autonomy of Member States is not excessively curtailed when legislating on a national measure.

However, this is not necessarily the case at all times, because the ECJ demands national courts take into consideration the latest available scientific evidence when carrying out the necessity test. Furthermore, it can be argued that the independent balancing exercise advocated by Advocate Generale Bot is necessary so as to ensure that legislators do not use a sledgehammer to crack a nut. As Stuart MacLennan explains:

To conclude otherwise would mean that where there is no alternative, a measure could never be disproportionate.

Having excluded the possibility of an independent balancing exercise when carrying out a test of proportionality, the core question remaining for the ECJ in Scotch Whiskey Association [2015] was the extent of the restrictiveness of the A(MPS)A 2012 vis-à-vis its alternatives. However, the ECJ only contrasted the MPU with excise duties. In doing so, it found that the MPU satisfied, in a targeted way, a key aim of the A(MPS)A 2012: reducing the consumption of alcohol by extreme drinkers in deprived communities, rather than the general population. This comparison was therefore always likely to fall short, as taxation, unlike the MPU, can be absorbed by retailers without being passed on to consumers. It is therefore regrettable that other alternatives were not explored.

Decision Two: The Supreme Court

The Supreme Court in Scotch Whisky Association [2017] considered the potential impact of the the A(MPS)A 2012 on the market. However, it left open the question of the extent to which it was necessary to do so. Although the Scotch Whiskey Association argued that the Scottish Government had failed to consider the market impact, the Supreme Court remained unconvinced - Lord Mance stated that:

Would or should a court intervene because it formed the view that the number of deaths or hospitalisations which the member state sought to avoid did not ‘merit’ or was not ‘proportionate to’ the degree of EU market interference which would be involved? I very much doubt it. Any individual life or well-being is invaluable, and I strongly suspect that this is why the Court of Justice did not endorse the Advocate General’s third stage enquiry, and treated the issue very lightly indeed.

The Supreme Court in Scotch Whisky Association [2017] was understandably reluctant to even compare the importance of market access with human life. Therefore, the appeal was dismissed, allowing the implementation of the MPU scheme. The Supreme Court was persuaded that the objective of the measure in question was not the overall reduction of alcohol consumption per se, rather a targeted approach to reduce consumption of the demographic at greatest risk from alcohol consumption.

However, the Supreme Court’s reluctance to make a direct comparison between human life and market access can be criticised as question-begging. Alleging a prima facie breach of Article 34 of the TFEU requires merely raising a hypothetical claim in which access to the domestic market may be hindered, even ‘indirectly’ and ‘potentially’. This follows the approach of the ECJ with its substantial reliance on its decision in Dassonville [1974], where the ECJ took the view that all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are to be considered as measures having an effect equivalent to quantitative restrictions.

However, this approach stands in stark contrast to other areas of free movement case-law where a de minimis threshold seems to be developed to eradicate meritless claims (for example, in services as shown by Commission v Italy (motor insurance) [2009]). Furthermore, a worrying asymmetry arises when there is by default an assumption that domestic regulation is incompatible with the internal market. This is exacerbated by the burden placed on Member States to justify any and all derogations. With Article 34 of the TFEU having a wider scope of prohibition, this exercise becomes all the more difficult and demanding for Member States, and it begs the question: should this be the case?

Is a Reconsideration of Article 34 of the TFEU Warranted?

The ECJ’s approach to the issue of market access reeks of what Robert Schütze has termed a ‘unitary approach’ – a broad understanding of the impediment of market access which includes all measures which are non-discriminatory or subject to mutual recognition. As a result, the ECJ articulates more clearly its instructions for national courts with regards to the deployment of a proportionality test that takes into account the latest scientific evidence.

Indeed, a more prominent role for the exercise of the proportionality test helps to mitigate the effects of a broad market access test insofar as it allows each case to be adjudicated on its own merits. However, as Alberto Alemanno has noted, the ECJ has moved further into the procedural arena of Member States than it normally does. Hanna Schebesta has suggested that this is due to the distinction between substantive and procedural rules in the legal systems of various Member States being blurred. Therefore, it has culminated in the ECJ giving extensive procedural guidelines without acknowledging national courts’ broad margin of discretion.

For instance, in the exercise of the necessity test, the ECJ has demanded that national courts take into account the latest scientific evidence when determining the effectiveness of the measure in question. This can be as wide as requiring evidence from behavioural science, despite long standing questions as to how they can be included in EU law procedurally. On this point, Hanna Schebesta and Kai Purnhagen have observed that:

Rulings [by the ECJ] are made without additional expert reports, and the outcome justification, if lacking an articulated empirical basis on actual consumer behaviour, may strike as arbitrary for want of convincing legal arguments to decide one way or the other.

In effect, the ECJ has implicitly granted itself the power to review whether such scientific evidence is sufficiently incorporated when the national court exercises the proportionality test. This is worrying given Member States’ widespread and persistent fear of ‘competence creep’ by the ECJ (or any other EU institutions) – a situation where the competenices of these EU institutions are expanded beyond that conferred by the various EU treaties.

The Relationship between Proportionality and Policy-Making

As Takis Tridimas has explained, there are three different types of preliminary reference rulings: outcome cases, where a solution is prescribed by the ECJ; guidance cases, where guidelines are developed by the ECJ; and deference cases, where solutions are left to the discretion of national courts. The ECJ's decision in Scotch Whiskey Association [2015] is worded as guidance, but is so detailed and tailored to the act in question that it is difficult for the national court to conclude otherwise.

As a result, the ECJ’s instruction for domestic courts to base their argument on scientific evidence is a double-edged sword. National courts are now able to compare the relative impact of different types of price regulations, MPUs and taxes on various kinds of drinkers. However, this highlights the issue of whether courts in general are suited, and have the necessary expertise, to review the science underlying a policy. In this regard, the approach to proportionality in Scotch Whiskey Association [2015] demonstrates a shift towards the courts in terms of institutional balance and is to be frowned upon.

Furthermore, such an interventionist approach neglects the inexorable reality that the Scottish Parliament lacks competence in the area of excise duty of alcohol. Naturally, the Scottish Government choosing price regulation rather than taxation seems less rational if one does not know that the Scottish Government only has immediate control over price regulation. Therefore, the case can be viewed as a wasted opportunity to clarify the extent to which the unfeasibility in practice of the proposed alternative solutions might affect the determination of necessity under the proportionality assessment. As such, there is an air of artificiality in both the outcomes of the domestic and EU-level proceedings.

Conclusion

The approach of the ECJ in Scotch Whiskey Association [2015] can be criticised for giving greater weight to the ‘market’ and the supranational, as opposed to the non-market and domestic. This is, in Arianna Andreangeli’s words, a jurisdictional ‘land grab’ that is dangerous as the scope of Article 34 of the TFEU starts to displace other powers conferred on the Member States, like the protection of public health. Indeed, this is to be frowned upon as it leaves little wiggle room for Member States to exercise their power in a sphere traditionally reserved for them.

Although the Supreme Court's decision in Scotch Whisky Association [2017] is an instance of a national court has asserted its competence vis-à-vis the CJEU by refusing to engage in an intrusive review of the legality of the Scottish government’s policy, this is not without its problems, as explained above. Nevertheless, in light of Scotch Whisky Association [2017], petitioners will have to cross significant hurdles to be successful in challenging similar measures in the future – particularly when the impact on trade is difficult to quantify or predict, through scientific means or other.

Therefore, as more EU Member States attempt to tackle societal problems associated with the harmful use of substances such as tobacco and alcohol, the Scottish Government’s MPU policy may well serve as a good working model for them. Further, this could also apply to the ‘sunset’ clause in the A(MPS)A 2012 as the Supreme Court looked favourably upon its insertion as an evidence that the MPU policy was proportionate. But before that, it is to be hoped that courts at national and EU levels remain sober to the questions left unanswered in Scotch Whisky Association [2017].

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Tagged: European Union, Supreme Court, Trade

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