And then we came to the end, or perhaps not! The Court of Justice speaks on the Scottish alcohol minimum pricing legislation!

Christmas is a time of gifts and what a greater gift than seeing the EU Court of Justice eventually handing down a much awaited judgment just before the 24th of December? This time the judges in Luxembourg have seen it fit to reward all of us who had been waiting to hear the fate of the Alcohol (Minimum Pricing) (Scotland) Act 2012 with their decision a day ahead of Christmas Eve. As this blogger taps away, the full version of the judgment has just been made available on the EU Court of Justice website (see: http://curia.europa.eu/juris/document/document.jsf?text=&docid=173249&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=1185858).  There will be plenty more to say about this decision, for sure; however, some initial reflections can already been sketched out.

On the face of it, the CJEU seems to have taken the advice of its Advocate General.  Thus, in respect of the allegation that the Scottish MUP would have infringed the principles of the EU CMO Regulation on the sale of wine, the Court confirmed that this Regulation did not preclude the Member States from adopting measures designed to pursue public interest goals, such as the objective of protecting human health that restricted free movement principles and in particular the freedom to set prices on the sale of wine.  Nonetheless, the Court held that such measures could only survive the internal market rules’ scrutiny if it could be shown that they were proportionate to the objectives they pursued: in other words, does the MUP not go beyond what is necessary to attain its beneficial goals, taking into account the internal market requirements and the objectives of the CMO itself? (see paras. 13-29).

This issue is examined by the Court when considering the central, in many ways, question of whether the 2012 legislation could comply with the requirements set in Articles 34 and 36 TFEU.  Starting from the nature, in EU law, of rules such as the Scottish MUP, the judgment is not surprising: the CJEU, confirming the views of AG Bot, states that the legislation in issue, to the extent that it hinders the ability of traders to “reflect in the selling price to consumers” any reductions resulting from lower costs for imported products, is capable of hindering the free movement of goods within the internal market.  Consequently, it represents a measure having equivalent effect to a quantitative restriction of trade in goods (MEQR) and can only be regarded as compliant with the TFEU if it also fulfils requirements of ‘appropriateness’ to the public interest objective it pursues and of ‘necessity’–the latter involving an assessment of its proportionality (see paras. 31-34).

The question of ‘appropriateness’ is dealt with, admittedly, rather curtly by the European Court: after acknowledging that the MUP seeks to attain a twofold public interest goal, i.e. the reduction of ‘hazardous’ alcohol consumption among “vulnerable” layers of society as well as the improvement of the general health and well-being of the Scottish population, the Court confirms that it is not unreasonable to regard the 2012 enactment as an “appropriate” means of achieving these objectives (see paras. 36-39).

Where the analysis is however more extensive, on the ground of the admittedly greater complexity of the questions before the CJEU is on the issue of ‘proportionality’: just as the AG had done, the Court shifts slightly its focus on the question of whether least restrictive means of achieving the public interest objectives being pursued could be found vis-a-vis the MUP.  As AG Bot has suggested, the generalised increase in indirect taxation is the “obvious candidate” to this end.  according to the Court, general excise increases constitute an equally “appropriate” means of upping the price of alcoholic drinks, inter alia for the purpose of boosting levels of public health; it further observes that, in their face, such measures appear to restrict  the freedom of movement of the affected goods to a lesser degree than the imposition of minimum prices: in the CJEU’s words, the MUP “(…) unlike increased taxation of those products, significantly restricts the freedom of economic operators to determine their retail selling prices and, consequently, constitutes a serious obstacle to access to the United Kingdom market of alcoholic drinks lawfully marketed in Member States other than the United Kingdom and to the operation of fair competition in that market. (…)” (para. 46).  Accordingly, for the Court the decision as to the lawfulness of the MUP comes down to a comparative analysis of the latter vis-a-vis fiscal measures of the kind discussed above: consequently, the Scottish legislation could only “survive” the application of the internal market principles if it can be shown that the “less restrictive” alternative is less effecting as a tool for the attainment of the beneficial goals it wishes to achieve, namely the “twofold goal” of greater public health among “vulnerable” or “hazardous” drinkers as well as among the general population.  Importantly, the Court emphasises that the attainment of “additional benefits”–in other words, of what can be seen as positive externalities above and beyond the objectives pursued directly by the Scottish legislation–is not just a “bonus” in favour of one or the other alternative, but must be seen as a ground to “reject” the measure that does not seem capable of securing these benefits (para. 48).

Admittedly, the CJEU does not tell us how the story ends… the ball is now in the court of the Court of Session in Edinburgh which, in the full knowledge of the facts of the case, must apply these principles to identify what alternative is both appropriate and less restrictive of the freedom of movement while at the same time securing the attainment of its public interest goals to the best extent (para. 49-50).

In many ways, this outcome was not unexpected, in light of existing precedent.  However, it leaves the Court of Session with a massive “hot potato”, due to the continuing commitment shown by the Scottish First Minister to this legislation, on the one hand, and on the other hand of the dogged determination of the SWA to continue to fight its case in court.  The initial reaction on the part of this blogger is, however, one of slight perplexity as to the approach adopted by the Court in respect of the ‘proportionality’ assessment: it seems to emerge from the judgment that the CJEU places a significant emphasis on the need to preserve “market access” for cheaper goods to the UK and thus to protect competition almost completely based on prices in a market where equally weighty considerations of public interest play a considerable part.  As was reiterated in other judgments, member states remain “sovereign” on matters of public health and thanks to the principle of subsidiarity can assess and determine levels of public health that are  appropriate for the survival of their population (see e.g. case C372/04, Watts, [2006] ECR I-4325, para. 86 and 92; see also case C-385/99, Muller-Faure’, [2003] ECR I-270, para. 102-103).  Thus, it is not unreasonable to think, as the CJEU, seems to acknowledge, that the Scottish Ministers, in the devolved asset of power within the UK, should remain competent to do so, albeit within the limits of the internal market principles.  And here is the crunch: can an increase in indirect taxation be regarded as less restrictive to free movement and thus more germane to the functioning of the common market? This will be for the Scottish Courts to determine: yet, one cannot help but wonder whether in light of the evidence brought forward in support of the MUP, an admittedly “modest” increase in prices for cheap alcohol may be regarded as perhaps not the magic bullet to cure Scotland of its drinking problem… but surely as an effective tool to balance, in the context of open and free markets, the needs of competition and free movement of goods against the demands of a healthy population.