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Above the minimum

12 December 16

The Inner House has accepted that the Alcohol (Minimum Pricing) Act passes the CJEU’s tests for compatibility with EU law. This article explains the route by which the court reached its conclusion

by Frances Ennis

According to the Scottish Government, our relationship with alcohol has become “unbalanced”. That might not come as a huge shock to most.

Even the most enthusiastic of drinks industry representatives would admit that there is a problem with certain drinking habits in Scotland; excessive alcohol consumption is said to cost Scots £3.6 billion every year.

The problem any Government faces is how to tackle proportionately (in both a political and a legal sense) the extremes of alcohol consumption, while limiting encroachment on the personal drinking habits of the millions of Scots who have a sensible relationship with alcohol – or certainly not one that involves panning in car windows on Sauchiehall Street of a Saturday night.

What is minimum unit pricing (“MUP”)?

In Scotland it is possible to exceed the recommended weekly alcohol intake for less than £3. According to the Government, evidence suggests that there is a strong correlation between price and consumption. Addressing price for high-strength products (such as own brand spirits and white cider), as part of a package of measures, is said to be the solution to the problem.

Minimum pricing was introduced by the Alcohol (Minimum Pricing) (Scotland) Act 2012, passed in June 2012. The Act amends the Licensing (Scotland) Act 2005 by adding a new clause prohibiting the sale of alcohol below a minimum price. This price is to be calculated with reference to the number of units of alcohol in a product. The Alcohol (Minimum Price per Unit) (Scotland) Order 2013 subsequently set the MUP at 50p.

MUP in context

MUP is only half the story when it comes to tackling alcohol misuse. In recent years we have seen a complete overhaul of liquor licensing legislation, with the repeal of the Licensing (Scotland) Act 1976 and its replacement by the 2005 Act (although since this “overhaul” we have seen significant additional primary and secondary legislation).

Many of these recent additions to the statute book seek to plug some of the gaps in a 2005 Act which many practitioners believe is not fit for purpose. We have also seen legislation lowering drink-drive limits, and introducing sectarian offences in licensed premises. Much of this legislation has been supported by the health lobby, which has become increasingly fervent in its involvement in regulation of the sale of alcohol, with many local NHS authorities objecting to certain liquor licence applications as a matter of principle.

Much of my work involves advising clients on whether their latest marketing campaign is “irresponsible” in terms of the 2005 Act: does it encourage customers to drink more, or quicker than they had intended? Pricing is an extension of the “responsible” sale of alcohol that the Government is seeking to achieve, and so a direct hit on price by the Government did not come as a huge surprise to many.

MUP in court

In 2012, the Scotch Whisky Association (“SWA”) sought judicial review of the 2012 Act. That petition was robustly dismissed. The SWA then appealed the decision, largely on questions of EU law, and the case was referred to the Court of Justice of the European Union (“CJEU”). The CJEU held that MUP may breach free trade rules, but that it was for Scottish courts to decide whether alternative methods of achieving the objective of reducing alcohol consumption were viable.

As has been well publicised, the Inner House refused the SWA’s latest appeal against the Outer House decision to refuse the judicial review petition: SWA v Lord Advocate [2016] CSIH 77 (21 October 2016).

The test to be applied

First, the court held that the Lord Ordinary had applied the correct test in assessing whether the 2012 Act could be justified under article 36 of the Treaty on the Functioning of the European Union (i.e. as a measure for protecting health and life); he had explained, with reference to Sinclair Collis v Lord Advocate 2013 SC 221 and Commission v Italy [2009] 2 CMLR 34 that any Government proposal ought to be appropriate for securing the public interest objective and must not go beyond what was necessary to obtain it. Moreover, it was for an individual state to determine the level of protection afforded to its citizens, and the way in which it was to be achieved. A member state did not need to prove that no other conceivable measure was available to achieve the aim; just that the measure proposed was appropriate and necessary (“objectively proportionate”).

Purpose of the proposed legislation

The Lord Ordinary had found that the aim of the 2012 Act was “the reduction of alcohol consumption… in particular... by hazardous and harmful drinkers”. This was in line with the CJEU, which had been satisfied that the proposal pursued the objective of the protection of health and life by (1) reducing the consumption of alcohol by hazardous or harmful drinkers (i.e. a targeted approach); and (2) reducing alcohol consumption by the population as a whole (a general approach). The purpose of the legislation was twofold, on the approach set out in an earlier policy memorandum.

Appropriateness of the 2012 Act in securing its objective

The petitioners’ position was that there was no evidence to suggest that a general reduction in consumption would produce any substantive health benefit. The court expressed some scepticism over this. It found that the evidence available indicated that there was a direct link between the price of alcohol and its rate of consumption, and that there was an equally clear link between consumption of alcohol and health problems. The fact that moderate drinkers might be affected by the measure did not detract from the legitimacy of the aim, i.e. the protection of public health and life.

The court was at pains to point out the “notorious” effects on health, crime and productivity of excessive alcohol consumption in Scotland. The effect of harmful consumption (i.e. hospital admissions and mortality rates) was even starker amongst the populations of the least affluent areas. MUP would target cheap alcohol, and therefore harmful and hazardous drinkers. Given that such a targeted approach is the main thrust of the proposal, it was incidental that MUP would not affect more affluent drinkers to the same extent. Therefore objectively, it could reasonably be concluded from the evidence that the measure was appropriate to attain the objective.

Taxation and proportionality?

Whether an alternative which was less restrictive of intra-EU trade would achieve the same objective is one of the more substantive arguments put forward by the SWA. In this context, the question was whether life and health, and indeed, the targeted protection of these, could be as effectively protected by tax increases. Only if MUP was the more effective way of achieving the aim would the interference with the market be necessary and therefore proportionate in terms of article 36.

The court upheld a number of the criticisms of increased taxation as an alternative:

1. It did not produce a minimum price. Low-cost alcohol has traditionally been used as a lure for off-sales customers, with supermarkets absorbing tax increases simply by offsetting them against non-alcohol-related products, while selling alcohol at below cost. Any increase in taxation would have to go hand in hand with a ban on below-cost alcohol sales, but that would be complex and difficult to enforce, compared to minimum pricing.

2. MUP is directly linked to the strength of the alcohol. Current EU tax arrangements relate to different types of products, each with a range of ABVs, but they do not allow taxation of a product based purely on its strength.

The court accepted evidence that general tax increases did not have a targeted effect on a harmful and hazardous drinker, and indeed, would have a disproportionately negative affect on moderate drinkers. If a minimum price was introduced, consumers could not simply “trade down” to a cheaper brand. In any event, EU law did not allow anything other than the same rate across a product. For all of these reasons, the court held that the alternative proposal of an increase in tax would be less effective than minimum pricing.

Where are we now?

Whether MUP will produce the promised £942 million of harm reduction within 10 years remains to be seen. The 2012 Act contains a “sunset clause”: within five years of it coming into force, ministers are required to produce a report detailing the operation and effect of MUP and determine whether MUP is to continue. Indeed, evidence relied on by the Government promises that positive changes will be seen within the first year of implementation. We should have a clearer idea sooner rather than later.

SWA has just indicated that it is seeking leave to appeal to the Supreme Court. Regardless of whether leave is granted, it is unlikely that this will be the last we hear from the Scottish Government, or the health lobby on how we drink alcohol.

Frances Ennis is a senior associate with Pinsent Masons LLP 

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