Scotch Whisky Association and others v Lord Advocate and Advocate General for Scotland

A summary of the Opinion of the Court in the reclaiming motion by the Scotch Whisky Association and others against the Lord Advocate and the Advocate General for Scotland.

In May 2012 the Scottish Parliament passed a Bill which became the Alcohol (Minimum Pricing) (Scotland) Act and received Royal Assent on 29 June 2012. The Act amended the Licensing (Scotland) Act 2005 by adding a new paragraph to Schedule 3. That paragraph read: 

“6A(1) Alcohol must not be sold … at a price below its minimum price”. 

The minimum price was to be calculated according to a formula: MPU x S x V x 100 (minimum price per unit x strength of the alcohol x volume of the alcohol in litres). 

The stated objectives of the Act include the prevention of crime and disorder, protecting and improving public health and protecting children from harm (2005 Act, s 4).  

On 19 July 2012, the petitioners, who represent a variety of alcohol manufacturers and suppliers, presented a petition for judicial review challenging the lawfulness of the legislation, arguing that it was outside the competence of the Scottish Parliament as it was incompatible with European Union law on protecting the free movement of goods within the single market. 

These arguments were rejected by the judge at first instance (the Lord Ordinary) in the Opinion accompanying his interlocutor of 3 May 2013. In the course of the hearing before him, the petitioners had suggested that a reference be made to the Court of Justice of the European Union (CJEU) if the EU law was not clear. That suggestion was rejected. 

On 8 July 2014, after a hearing before an Extra Division (appeal court), six questions were referred to the CJEU. The Judgment of the CJEU was obtained on 23 December 2015.  

The CJEU considered that minimum unit pricing would restrict the free movement of goods within the single market. On that basis, the interference would need to be justified as being necessary to protect human life and health. The CJEU was satisfied that the legislation did pursue the objective of protecting health and life by reducing,  in a targeted way,  both the consumption of alcohol by consumers whose consumption was hazardous or harmful, and also, more generally, the population’s consumption of alcohol. In order to be justified, the measures proposed had to be appropriate for securing the attainment of the objective pursued and must not go beyond what was necessary in order to attain it. 

An alternative approach, such as a tax measure designed to increase the price of alcohol across the board, might in principle be less restrictive on the single market than a measure which imposed a minimum unit price. The CJEU affirmed that it was ultimately for the national court to determine whether measures other than minimum unit pricing, such as increased taxation on alcoholic drinks, were capable of protecting human life and health as effectively as the current legislation, whilst being less restrictive of trade in alcohol products within the EU. 

Following the reference, the appeal fell to be resumed in Scotland and determined in the light of the European court ruling. The First Division (appeal court) had to determine whether the judge at first instance had erred in determining the lawfulness of the measure by applying the structured proportionality test set out by the CJEU in its Judgment. There were four questions for consideration. 

The first was whether the judge had applied the correct test in assessing whether the legislation could be justified under Article 36 as a measure for protecting health and life. The second was whether the judge had identified the correct aim of the legislation.  He had found that the aim was the reduction of alcohol consumption, in particular by hazardous and harmful drinkers. This was principally directed towards the protection of health and life. The third was the appropriateness of the legislation for achieving the identified objectives or aims. The petitioners maintained that there was no evidence that a general reduction in the population’s consumption of alcohol would have any significant health benefit. The fourth related to the necessity of the legislation and whether a less restrictive measure, notably an increase in tax, might achieve the same or a similar objective.  

The First Division held that the judge at first instance had applied the correct test.  He had identified the correct aim of the legislation and that minimum unit pricing was appropriate to achieve the intended aims. The true area for debate was the fourth question; whether modification of taxation, within the permissible bounds of EU law, could achieve similar results in targeting cheap alcohol as were achievable with minimum pricing.  

The test had been described by the CJEU as whether life and health could be as effectively protected by tax changes. That was precisely the test adopted by the judge at first instance.  If the alternative would not be as effective, minimum pricing would be necessary and proportionate. 

The CJEU ruling had confirmed that it was primarily for the state to determine both the level of protection which it wished to afford to its citizens’ life and health and the means by which that level of protection could be achieved. Nevertheless, the court required to examine objectively whether the aims could be achieved by a measure which was less restrictive of intra-EU trade. 

The court required to carry out a structured proportionality exercise. The task was not simply to balance the benefits of a measure such as minimum pricing with the impact on intra-EU trade. That was a matter for the democratically elected Government and not the court. It was not an attempt to balance the cost-benefits of minimum pricing with taxation measures. This too would put the court in the position of substituting its own view of where the balance ought to be struck between protecting health and interfering with the market. 

The CJEU set out in clear terms how the second stage of the structured proportionality assessment was to be carried out. The court had to compare the effectiveness of minimum unit pricing in achieving the targeted objective, with other measures which could also achieve that objective and which were less restrictive of intra-EU trade. Only if minimum pricing was more effective in achieving the objective would the interference with the market be necessary and therefore proportionate under Article 36. The identification and selection of other measures to compare with minimum pricing, such as increased tax, assumed that the other measures would be less restrictive of intra-EU trade. 

The First Division agreed with the judge at first instance who found that the fundamental problem with an increase in tax was simply that it did not produce a minimum price. Many supermarkets had, in the past, sold alcohol at below cost.  They could absorb any tax increase by off-setting them against the price of other products unrelated to alcohol. Cheap alcohol was perceived as a draw, lure or enticement to pull shoppers into the particular retailer’s premises and away from those of the competition. 

The advantage of the proposed minimum pricing system, so far as protecting health and life was concerned, was that it was linked to the strength of the alcohol. Current EU tax arrangements related to different types of product (wine, spirits, beer and cider etc) each of which had a range of alcohol strength. As the first instance judge discovered (Opinion, May 2013) they did not permit taxation of wines at variable rates according to that strength. The judge had correctly concluded that whatever arguments may be deployed against it, there was evidence which demonstrated that the alternative of increased tax, with or without a prohibition on below cost sales, would be less effective than minimum pricing. 

The First Division concluded that the judge had directed himself correctly on EU law, that his reasoning on the effectiveness of minimum pricing, as compared to tax, was sound and that the grounds submitted in the appeal were not well founded. 

In those circumstances, the appeal was refused and the court adhered to the interlocutor issued by the judge at first instance of 3 May 2013 refusing the judicial review of the Act.

The full opinion of the court can be accessed via the Scottish Courts and Tribunals Service website (see link below) from 11am on 21 October 2016:

http://www.scotcourts.gov.uk/search-judgments/judgment?id=9a1821a7-8980-69d2-b500-ff0000d74aa7

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