Out-Law News | 19 Jul 2016 | 11:13 am | 2 min. read
If the Inner House of the Court of Session decides that less restrictive tax measures could have been used instead of minimum pricing, it will have to strike down the planned policy as contrary to EU law.
The Alcohol (Minimum Pricing) Act was passed by the Scottish Parliament in May 2012. It prohibits the sale of alcohol below a minimum price, calculated on the basis of the drink’s alcoholic content. The Scottish ministers drafted regulations setting a minimum price per unit of 50p in 2013, although this has not yet been introduced due to the ongoing legal proceedings.
A decision by the court in favour of the SWA would be the second successful challenge to an act of the Scottish Parliament since its creation. If the court finds in favour of the Scottish Government and upholds the policy, the European Commission could potentially bring the UK before EU courts if it views the policy as a breach of EU law.
Licensing law expert Frances Ennis of Pinsent Masons, the law firm behind Out-Law.com, said that the case remained very important despite the UK’s recent decision to leave the EU.
“The UK remains an EU member state at present, and is still bound by the EU treaties,” she said.
“The case is based on an important EU treaty article concerning the free movement of goods. Since this article is crucial to the operation of the common market, it may continue to be relevant if the UK attempts to remain part of the common market as part of the ‘Brexit’ negotiations,” she said.
In December 2015, following a referral from the Court of Session, the Court of Justice of the European Union (CJEU) ruled that minimum unit pricing was incompatible with EU law “if less restrictive tax measures can be introduced”. It referred the case back to the Scottish court to rule on this final point.
The CJEU ruled that the planned policy was potentially in breach of EU law, as it was “liable to undermine competition by preventing some producers or importers from taking advantage of lower cost prices so as to offer more attractive retail selling prices”. Interference with EU law may be permitted on public health grounds provided that the policy is proportionate.
SWA argued in the Court of Session that the Scottish Government was required to produce objective and impartial evidence demonstrating that the intended health benefits of its policy could not be otherwise achieved through less restrictive means. The evidence that the government brought before the court was insufficient to meet these tests, meaning that minimum unit pricing should be declared illegal, according to Alex Neil QC arguing on behalf of SWA.
Neil further argued that the health protection benefits of minimum pricing could be achieved through a combination of other methods including increased excise duties, a sales tax on alcohol or prohibiting the sale of alcohol at zero profit. The court will not be able to substitute any of these measures for minimum unit pricing as part of its judgment, but could view them as less restrictive alternatives on the evidence available.
However, the Scottish Government has argued that these alternative measures would be inappropriate, potentially leading to more harmful drinking rather than less. In addition, excise duty increases would need to be very substantial to have an effect, which would be likely to distort trade. The government also asked the court to consider the obligation placed on it by the legislation to review the policy and its effects after six years, known as the ‘sunset clause’.