Vorsprung durch Technik? Audi scores victory in trade mark appeal before the EU General Court

Alexandros Antoniou, University of Essex School of Law, a.antoniou@essex.ac.uk

On 12 July 2019, the EU General Court (GC) dismissed an appeal (Audimas v EUIPO - Audi (AUDIMAS)) from a Lithuanian sportswear company, whose trade mark was successfully opposed by the German automobile manufacturer Audi.

Background

In October 2014, the applicant, Audimas AB, obtained through the World Intellectual Property Organisation (WIPO) an international registration for the mark displayed below, designating the European Union (EU) as one of the protection territories.

The mark above represents the applicant company’s name in black font, with stylised open and closing brackets right above the word element. Registration was sought for classes 18, 25 and 35 of the Nice Agreement, covering a wide variety of leather goods, clothing, footwear and headgear as well as advertising and business management services. In June 2015, the international registration designating the EU was notified to the EU Intellectual Property Office (EUIPO), pursuant to the provisions of the Council Regulation 207/2009 on the Community Trade Mark (now replaced with Regulation 2017/1001 on the EU Trade Mark).

In August 2015, the German automotive company AUDI AG opposed the mark applied for on the basis of its previously registered EU word mark ‘AUDI’ for goods and services falling in classes 18, 25 and 35 of the Nice Agreement as well as class 12, which covers vehicles and vehicle components. Audi claimed, in particular, infringement of Article 8(1)(b) of the 2009 Regulation, i.e. invalidity based on ‘relative grounds’ which relate to conflicts with earlier trade mark rights that belong to third parties (these provisions are preserved under the new 2017 Regulation). The Opposition Division of the EUIPO upheld the opposition two years later. Audimas appealed the decision in November 2017 but the Office’s Second Board of Appeal rejected the appeal in May 2018 (‘the contested decision’).

Specifically, the Board of Appeal found that the relevant public in this case consisted of ‘professional customers' and 'end consumers', whose level of attention varied from medium to high. In addition, the signs at issue were broadly similar at least to the extent that Audi’s earlier mark was reproduced in full in the dominant element of the applied-for mark. The Board also considered that a Spanish-speaking consumer would break down the mark applied for in two verbal parts, i.e. ‘audi’ and ‘mas’, because the latter element alluded a meaning to them, namely 'more' or ‘plus’. Moreover, the figurative element of the brackets was found to be ‘purely ornamental’ and its combination with the term ‘mas’ meant that the mark in question was at best only weakly distinctive. The Board of Appeal ultimately concluded that there was a likelihood of confusion for the Spanish-speaking part of the relevant public within the meaning of Articles 8(1)(b) of the 2009 and 2017 Regulations.

The legal framework and applicable principles

Under both Regulations 2009 and 2017, an opposition must be based on rights held by the opponent in an earlier trade mark (or other form of trade sign). The grounds on which an opposition can be based are called ‘relative grounds for refusal’, the relevant provisions of which are found in Article 8 the Regulation. By contrast to ‘absolute grounds for refusal’, which are examined ex officio by the EUIPO, relative grounds for refusal are inter partes proceedings based on the likely conflict with earlier rights. This means that the burden falls on the owner of earlier rights who needs to be vigilant in checking the filing of potentially conflicting EUTM applications and oppose the registration of marks when necessary.

More specifically, under Article 8(1)(b):

upon opposition by the proprietor of an earlier trade mark, the trade mark applied for shall not to be registered if, because of its identity with or similarity to the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks, there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected. The likelihood of confusion includes the likelihood of association with the earlier trade mark.

Audimas contested the Board of Appeal’s findings in relation to the comparison of the signs and the existence of a likelihood of confusion. According to the established case law of the Court of Justice on the interpretation of Article 8(1)(b), the risk that the public might believe that the goods or services in question come from the same undertaking or from economically-linked undertakings, constitutes a likelihood of confusion (see Canon [1998] EUECJ C-39/97). The likelihood of confusion on the part of the public must be appreciated globally, according to the perception of the marks in the mind of the average consumer of the goods or services concerned. It is also settled case law that the average consumer normally perceives a mark as a whole and does not proceed to examine its various details (see Sabel [1997] EUECJ C-251/95). Consequently, the visual, aural and conceptual similarities of the marks must be assessed with reference to the overall impression created by the marks bearing in mind their distinctive and dominant components. Account must be taken of all factors relevant to the circumstances of the case and, in particular, the similarity between the marks and the goods or services. A lesser degree of similarity between those goods or services may be offset by a greater degree of similarity between the marks, and vice versa (see Lloyd Schuhfabrik Meyer [1999] EUECJ C-342/97). Where the earlier trade mark has a highly distinctive character, such as Audi’s mark in the present case, either because of its intrinsic qualities or because of the use that has been made of it, the likelihood of confusion is greater.

The level of attention of the relevant public

The GC disagreed with the applicant’s claim that buyers of Audi cars would demonstrate an increased level of attention, which would in turn decrease the likelihood of confusion between the marks at issue. Indeed, the prospect of an expensive purchase, e.g. in the case of luxury products, is a good reason for the average consumer to be more circumspect in relation to the origin and the quality of the articles concerned. A high degree of attention is likely to be displayed during the purchasing process of a specific product which is generally regarded as reflecting its owner’s social status. Nevertheless, both Audi’s earlier mark and Audimas’ applied-for mark extended to clothing and footwear as well. These are mass consumption goods, which are frequently purchased and used by the average consumer who nevertheless still pays a fair degree of attention in choosing them, albeit not above average (see Esprit International v OHMI-Marc O'Polo International [2011] EUECJ T-22/10). Thus, the Board of Appeal was not wrong in assessing the relevant public’s attention in the present case as varying from medium to high.

The goods and services concerned

The goods and services covered by Audimas’ mark were deemed at least in part identical or similar to those covered by Audi’s earlier mark. This conclusion was not disputed by the applicant and was approved by the GC.

The comparison of the signs and the likelihood of confusion

The GC agreed with the Board’s ruling that the dominant element of the applied-for mark was the fanciful term ‘audi’, since the second verbal element of the applied-for mark, i.e. ‘mas’, was already well-known to Spanish speakers and had a lower distinctive character. Moreover, the figurative element of the brackets was not, in the GC’s view, ‘particularly original or elaborate’. As such, it did not add anything ‘striking’ to the overall impression created by it in the perception of the relevant public.

The visual similarity between the marks was reinforced by the fact that both shared the ‘audi’ element which constitutes the earlier mark and is found at the beginning of the applied-for mark. This is consistent with previous case law, according to which the fact that a mark consists exclusively of the earlier mark to which another word is attached is an indication of the similarity between those two marks (see Fon Wireless v EUIPO-Henniger [2016] EUECJ T-777/14). On the phonetic level, the degree of similarity between the marks was found to be essentially ‘greater than average’, notwithstanding the different pronunciation given to the contested mark by the syllable ‘mas’. It is also a settled principle that both verbally and phonetically the average consumer generally pays more attention to the beginning of the mark than its ending, since the first part of a trade mark normally has a greater impact than the final part (see L'Oréal v OHMI-SPA Monopole [2009] EUECJ T-109/07 and Gappol Marzena Porczynska v EUIPO-Gap [2017] EUECJ T-411/15). Finally, the GC noted that the absence of conceptual similarities between the two signs should not deflect attention from their substantial visual and phonetic similarities and concluded that they were ‘broadly similar’.

In the GC’s view, the Board’s conclusion that the Spanish-speaking part of the relevant public would eventually establish a link between the contested mark and Audi could not be called into question. The Board of Appeal had held, and the GC agreed, that it could not be ruled out that the applied-for mark, with its element ‘mas’ attached to the word ‘audi’, could be taken to identify an exclusive series of goods or services of the Audi family of brands. The relevant public could perceive the ‘Audimas’ mark as a ‘particular variant’ of the earlier mark for a specific type of goods with a positive quality. In light of the foregoing, the GC dismissed the applicant’s action.

Commentary

In sum, the GC upheld the original EUIPO decision, ruling that the applied-for mark by Audimas would likely be confused with Audi’s earlier trademark. The upheld contested decision is undoubtedly a victory for Audi, one of the world leaders in the automotive sector. On the other hand, Audimas has become, since its incorporation in 1931, one of the market leaders in the design and manufacture of sports and active lifestyle apparel in the Baltic States. The brand has been cooperating with the Lithuanian National Olympic Committee as an official supplier of sportswear for the Lithuanian Olympic family for more than 15 years. In 2013, Audimas also began sponsorship of the Belarus National Olympic Committee. This is certainly a displeasing for them outcome, which might be appealed to the Court of Justice of the EU.

Despite Audi’s weak connection to the clothing industry, the GC’s ruling can hardly be a surprise. It is grounded in some well-established principles relating to the comparison of signs in trade mark disputes. When assessing their similarity, the marks in question will be considered as a whole. Although it is not possible to isolate and focus exclusively on one component of a complex mark and compare it with another mark, the assessment of similarity may be made solely on the basis of the dominant component of a complex mark where all the remaining components of the mark – like the brackets and the element ‘mas’ in this case – add very little to, or are negligible in, the overall impression produced by it.

In addition, where a complex mark comprises word and figurative elements, the former would in principle be considered more distinctive than the latter, because the average consumer tends to refer to the goods or services in question by quoting the name of the mark in question, rather than by describing its figurative element (see Coca-Cola v OHMI-Mitico [2014] EUECJ T-480/12). The shared ‘audi’ element was incapable in this instance of lending the applied-for mark a distinctive character and accentuated the likelihood of confusion. Also, the presence of a few different syllables is not always enough to exclude the existence of a phonetic similarity between two signs. In the present case, the phonetic difference between the signs at issue, resulting from the addition of a second syllable ‘mas’ in the applied-for mark, was not sufficient to overcome and preclude the phonetic similarity between ‘Audi’ and ‘Audimas’ taken as a whole.

These opposition proceedings also confirm that, if a likelihood of confusion between two conflicting rights relating to the EU is established in a specific linguistic area, this is enough for the registration of the later mark to be refused. When an opposition is filed pursuant to Article 8(1)(b) and a likelihood of confusion can indeed be found on a substantial part of the public, the reasoning of the decision typically concentrates on that part of the public that is most prone to confusion, making the examination of the perception of the marks in several languages redundant. In addition, where the relevant public consists of both professional and general consumers, the finding of a likelihood of confusion in relation to just one part of the public is enough to uphold an opposition.

Finally, the outcome serves as a useful reminder of the need to conduct comprehensive trademark searches prior to filing a trade mark application, which needs to be carefully tailored to in order to maximise the chances of a successful registration. Opposition hearings can be very costly to defend. If unsuccessful, an applicant will have to pay not only their legal costs but some of the costs of the other party too – and will still not be able to achieve registration of their mark.

EU General Court rules Adidas’ three-stripe trade mark invalid

Alexandros Antoniou, University of Essex, School of Law - a.antoniou@essex.ac.uk

On 19 June 2019, the EU General Court (GC) ruled that the three-stripe EU trade mark (EUTM) owned by Adidas was invalid. It upheld the earlier decision of the EU Intellectual Property Office’s (EUIPO) Second Board of Appeal, which had found that the trade mark at issue was ‘extremely simple’ and devoid of any distinctive character, both inherent and acquired through use.

Background

The trade mark in dispute was originally registered on 21 May 2014. It covered clothing, footwear and headgear (class 25 of the Nice Classification system) and was identified as a figurative mark, i.e. a trade mark where non-standard characters, stylisation or layout, or a graphic feature or a colour are used. It corresponded to the following description and is reproduced below: ‘The mark consists of three parallel equidistant stripes of equal width applied to the product in whichever direction’.

   

In December 2014, a Belgian company named Shoe Branding Europe BVBA filed an application for declaration of invalidity of this mark pursuant to what is now known as Article 59(1)(a) of EUTM Regulation 2017/1001 (absolute grounds for invalidity) in conjunction with Article 7(1)(b) of the same (absolute grounds for refusal). In June 2016, the Cancellation Division of the EUIPO granted the application on the grounds that the mark inherently lacked distinctive character.

Adidas challenged the decision in August of the same year, claiming that, although their EUTM was devoid of inherent distinctiveness, it had nevertheless acquired a distinctive character in relation to the goods for which it was registered in consequence of the use made of it throughout the EU after registration in accordance with Articles 7(3) and 59(2) of the Regulation. After the Second Board of Appeal confirmed the Cancellation Division’s assessment in March 2017, Adidas brought the matter before the GC.

In support of its action, the Germany-based company put forward a single plea in law, which consisted of two parts: first, that the Board of Appeal wrongly dismissed several items of evidence with the justification that they related to signs ‘other than the mark at issue’; and second, that the Board of Appeal erred in holding that it was not established that the mark had acquired distinctive character following its use within the EU.

Unjustified dismissal of some of the evidence

In relation to the first part of its plea, Adidas submitted that the Board had misinterpreted the mark in question and misapplied the ‘law of permissible variations’. Specifically, the applicant argued that the Board should not have assumed that the mark was only claimed in specific dimensions, i.e. that it was represented by three vertical, parallel black stripes of equal thickness against a white background with a ratio of approximately 5:1 between the total height and width of the mark. Instead, Adidas claimed, the Board should have treated the mark as a ‘surface pattern’ the proportions of which were not fixed, i.e. that the mark was constituted of three parallel equidistant stripes that could be extended in length or cut in different ways, including cut at a slanted angle, depending on the goods on which it was applied.

The GC however rejected this claim, concluding that the mark in question could not be regarded as a pattern mark and there were no indications that it should be intended as such. Adidas’ mark had been registered as a figurative mark. Neither its registered graphic representation nor its description made it clear that it consisted exclusively of a set of elements which were repeated regularly. Importantly, Adidas’ claim was not consistent with the graphic representation of their registered mark, characterised by a rectangular configuration which was created by three stripes being cut at a right angle and of a specific ratio of height to width. In addition, the description of the mark on the register did not state that the length of the stripes could be modified or cut in different ways. The Board of Appeal’s interpretation of the mark at issue as an ‘ordinary figurative mark’ was thus not erroneous. This conclusion could not be called into question by the ruling in Apple Inc v Deutsches Patent- und Markenamt [2014] EUECJ C-421/13, which established that a design may be registered as a trade mark without indicating the size and proportions of the object it represents. This cannot be taken to suggest, however, that a mark can be registered without defining the proportions of the sign itself.

Adidas was not justified in pleading an infringement of the ‘law of permissible variations’ either. This principle, which is rooted in Article 5C(2) of the Paris Convention for the Protection of Industrial Property, allows immaterial differences between the form of the mark as it was registered and the form in which it is used by the proprietor, so long as these differences do not affect the distinctive character of that mark. The applicant had produced evidence (mainly consisting of images from catalogues and promotional materials, showing goods bearing various of their marks) which, in their opinion, related to forms of use of their three-stripe mark that did not alter the distinctive character of that mark as registered.

Confirming the Cancellation Division’s assessment, the Board of Appeal had found that the ‘vast majority’ of the evidence produced related to signs other than the mark in dispute itself. The following examples of evidence, in particular, failed to show, according to the Board, genuine use of the mark:

The GC found that the Board was entitled to dismiss this evidence for several reasons: first, the ‘extremely simple character’ of the mark – which was not disputed by the applicant – meant that minor alterations to the mark could amount to significant changes. As such, its amended form may not be regarded as broadly equivalent to its registered one. The GC emphasised that ‘the simpler the mark, the less likely it is to have a distinctive character and the more likely it is for an alteration to that mark to affect one of its essential characteristics and the perception of that mark by the relevant public’.

Second, the evidence did not show the mark at issue, but ‘other signs’ consisting of three light stripes against a dark background. The act of reversing the colour scheme, namely showing white stripes against a black background, did not conform with the initial contrast between the three black stripes against the white background, including the white spaces separating those stripes. In light of the extreme simplicity of the mark in question, the failure to respect this specific contrast resulted in a significant variation of the registered form of the mark, despite the fact that the sharp contrast between the three stripes and the background was preserved.

Third, the first nine images produced by Adidas showed signs which had only two – not three – parallel black stripes contrasting with a white background. Even if these images could be taken to show signs consisting of three white (or light) stripes against a black (or dark) background, they nevertheless presented the mark in dispute in forms where the original colour scheme was inverted. As such, they had to be dismissed for the reasons presented in the previous paragraph.

Fourth, the use of sloping stripes on the clothing of the athlete in motion shown in the tenth image above was found to have affected the distinctive character of the mark. This was not only because of the reversed colour scheme, but also because it did not meet the dimensions of the mark as registered with its vertical and parallel stripes. The applicant’s argument that their direction depended on the athlete’s movement and the way the items were folded or displayed did not seem to persuade the Court.

As regards the remaining images produced in evidence, the photographs of footwear broadly suffered the same disadvantage in that the modification to the thickness and length of the stripes, as well as their cut at a slanted angle, noticeably affected several characteristics of the mark and as such related to forms of use that differed from the form in which the mark had been registered. Finally, Adidas acknowledged at the hearing the irrelevance of the last four images showing more complex signs. Overall, the GC, siding with the Board, concluded that the signs appearing in most of the images submitted by the applicant were rightly dismissed, as they ‘differed significantly’ from the registered form of the three-stripe mark. Consequently, there was no violation of the law of permissible variations.

Assessment concerning the acquisition of distinctive character through use

The second part of Adidas’ plea was that the Board erroneously found that the applicant had failed to show that the mark in question had acquired distinctive character in consequence of the use that had been made of it within the EU. The evidence adduced by Adidas included: images (discussed in the examination of the first part of the plea above); figures concerning its turnover as well as figures showing the amount invested in promoting the mark; and market surveys.

However, the relevance of these items was questioned by the GC. It followed from the assessment of the first part of the plea that the applicant could not rely on all the evidence demonstrating a mark consisting of three parallel equidistant stripes. The GC observed from the very start that:

the relevant evidence is only that which shows the mark at issue in its registered form or, failing that, in forms which are broadly equivalent, which excludes forms of use where the colour scheme is reversed, or which fail to respect the other essential characteristics of the mark at issue.

Before reviewing the evidence submitted by Adidas, the Court also recalled well-established principles regarding acquired distinctiveness. It follows from the unitary character of the EUTM (i.e. the EUTM extends to the territory in which the EU Treaties apply and has an equal effect throughout the EU, including uniform protection, invalidity, revocation and transfers of ownership), that in order to be accepted for registration, a sign must have distinctiveness (inherent or acquired through use) throughout the EU. It is not necessary that separate proof is submitted in respect of each and every Member State. It is sufficient that the evidence submitted is capable of establishing the acquisition of distinctive character throughout the Member States of the EU. Acquired distinctiveness may be extrapolated from evidence of use in one country to another in certain, yet limited circumstances, e.g. where there is a certain degree of geographical, cultural or linguistic degree of proximity.

In the present case, it was not disputed that the mark at issue was inherently devoid of distinctive character throughout the whole of the EU and as such the Board of Appeal had rightfully examined whether the mark had acquired distinctiveness for the relevant public throughout the territory of the EU. The only evidence which was material to some extent were five market surveys carried out from 2009 to 2011 in Estonia, France, Germany, Romania and Spain. These related to the use of the mark in its registered form and measured the perception of that mark by the relevant public but covered only part of the EU and their results were not representative of the entire EU territory.

As far as the images are concerned, the GC did not seem to be moved by the nearly 12,000 pages of evidence produced during the proceedings before the EUIPO. In the Court’s view, Adidas failed to identify images which could establish use of the mark in its registered form or in forms which could be deemed broadly the same. The first three images above showing the three-stripe mark affixed to sports bags were not considered relevant, because such items were not covered by the goods at issue (clothing, footwear and headgear). Moreover, other images that did correspond to the registered mark and were capable of establishing some use did not sufficiently indicate the scale and duration of that use or its impact on how the mark is perceived by the relevant public.

‘Impressive figures’ concerning Adidas’ turnover, the amount of marketing and advertising costs and its sponsorship activities in relation to sporting events showed the ‘considerable investment’ made by the applicant in promoting its marks in an intensive and continuous manner within the EU. Nevertheless, these figures concerned the applicant’s ‘entire business […], all of the goods and all of the marks taken together’, including the promotion of irrelevant products such as sporting bags and goods bearing only signs other than the three-stripe mark in dispute. Due to the lack of a demonstrable link between the figures provided and the mark at issue as well as between the figures and the goods in question, the GC concluded that it could not be established that the mark had been used and had acquired distinctiveness as a result of the use made of it.

The GC concluded that under these circumstances:

[…] the various items of evidence adduced by the applicant, even taken as a whole: (i) do not prove use of the mark at issue throughout the territory of the European Union; and (ii) are not sufficient, in any event, to demonstrate that, by virtue of that use, the mark at issue has come, in the whole of that territory, to identify the goods for which it was registered, and thus to distinguish those goods from those of other undertakings.

On those grounds, the GC dismissed the action and ordered Adidas to pay its own costs as well as the costs incurred by the EUIPO.

Commentary

The following interesting points can be gleaned from the GC’s much-anticipated judgment. Trade mark owners must ensure that their EUTMs are properly recorded and need to use them in commerce in the form that was originally registered or in a form that can be deemed broadly equivalent to the essential characteristics of its registered form. The mark itself must be identified in a way that accurately determines the scope of the protection afforded to its proprietor. The EUIPO cannot consider characteristics of the mark applied for that are not clearly set out in the application for registration or the accompanying documents. It is also evident from this case that the GC is likely to strictly adhere to the specific dimensions, proportions and overall configuration of the submitted mark. As the Court highlighted, ‘it is for the trade mark applicant to file a graphic representation of the mark corresponding precisely to the subject matter of the protection [they] wish to secure. Once a trade mark is registered, the proprietor is not entitled to a broader protection than that afforded by that graphic representation’. The salience of filing marks correctly becomes even more pronounced in light of the acceptance of new types of marks (e.g. multimedia marks or hologram marks) by the EUIPO as and from 1 October 2017, following the key changes brought by the new EUTM Directive 2015/2436.

Care also needs to be taken with the quality and rigour of the evidence that may need to be preserved, gathered and submitted in order to establish that a mark has acquired the necessary level of distinctiveness across the entirety of the EU. In the present case, the GC challenged the multiple forms of the three-stripe mark which it found inconsistent with the mark’s essential characteristics, despite its comparatively high degree of recognition and regardless of whether its variations might be perceived by the relevant public to be corresponding to the proprietor’s goods or services.

Furthermore, the protection afforded by the law of permissible variations is not boundless and it is uncertain which forms of a mark do not alter the distinctive character of that mark as registered. A question may arise, for example, in cases where use in various colours has been made of a mark, the original representation of which is colourless on the register. Provided that the mark is still visible, it is not entirely clear when such use would affect the distinctive character of the mark in the form under which it was registered. So far as figurative marks are concerned, a different graphical representation is unlikely to diminish the protection granted to the mark, as long as it can reasonably be regarded as another form of the same subject-matter.

Finally, it cannot plausibly be maintained that the GC’s judgment sounds the death knell for all of Adidas’ marks featuring the three-stripe logo. The German corporation owns several other similar marks, like this and this, which remain valid. The impact of the present ruling is limited to the specific execution of the three-stripe mark shown earlier. It is nevertheless a disappointing for them outcome, which might be appealed to the Court of Justice of the EU.

Photo credit: Amazon.co.uk

The Marrakesh Treaty judgment: the ECJ clarifies EU external powers over copyright law

Gesa Kübek, PhD candidate at the law faculty of the University of Passau.

On 14th February 2017, the European Court of Justice (ECJ) concluded, in Opinion 3/15, that the European Union (EU) is exclusively competent to conclude the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or Otherwise Print Disabled (hereafter: Marrakesh Treaty). Its decision in Opinion 3/15 mirrors, at first sight, Advocate General (AG) Wahl’s Opinion, which equally argued that the EU has exclusive competence to conclude the Marrakesh Treaty. A closer look at Opinion 3/15, however, reveals that the Court opted for a much stricter interpretation of the scope of the EU’s Common Commercial Policy (CCP) – ie the EU’s international trade powers – than the AG. Moreover, the Court’s answer to the question of exclusivity does not clarify the correct choice of legal basis.

The following blog post provides an overview of the Court’s Opinion 3/15 and a short analysis thereof. The first part describes the conflict at stake and the arguments of the parties. The second part outlines the Court’s position. The final section discusses some of the implications of Opinion 3/15 for EU treaty-making.

The conflict at stake: Questions of exclusivity and the choice of legal basis

In June 2013, the World Organisation on Intellectual Property (WIPO) finalised the negotiations of the Marrakesh Treaty, which aims to facilitate access to published work for persons who are blind, visually impaired or otherwise print disabled (hereafter: “beneficiary persons”). The Marrakesh Treaty stipulates two separate, but interrelated instruments to fulfil its objectives. First, it obliges its contracting parties to provide for an exception or limitation to the rights of reproduction, distribution and making available to the public in order to make format copies more readily available for beneficiary persons. Second, it facilitates the cross-border exchange of accessible format copies.

In April 2014, the EU Council decided to sign the Marrakesh Treaty for the European Union based on Article 207 TFEU (the EU’s CCP power) in conjuncture with Article 114 TFEU (the EU’s internal market power, which is the basis for harmonising copyright law within the EU, among other things). The subsequent Commission proposal for the conclusion of the agreement was, however, rejected by the Member States as represented in the Council, which caused fierce institutional debate over the choice of legal basis. According to the Commission, Arts. 207 and 114 TFEU were correctly selected. In the alternative, the Marrakesh Treaty may be based on the CCP alone, which the Lisbon Treaty confirms as an exclusive competence (Art. 3 (1) (e) TFEU). In any event, the Commission argued that the rights and obligations comprised by the Marrakesh Treaty were largely harmonized by EU internal legislation. As a result, it asserted that exclusive EU competence can be implied (Art. 3 (2) TFEU). 

The eight intervening Member States rejected the assumption of EU exclusivity. Instead, in their view, the competences to conclude the Marrakesh Treaty ought to be shared, which may result in the conclusion of a “mixed agreement” that lists both the EU and the Member States as contracting parties. Given the persisting institutional conflicts, the Commission asked the Court to clarify whether the EU has the exclusive competence to conclude the Marrakesh Treaty.

As was stated above, AG Wahl supported the Commission’s quest for exclusive EU treaty-making powers. Somewhat surprisingly, the AG, however, determined that the Marrakesh Treaty should be concluded on the basis of Art. 207 TFEU on the CCP and – as contended by numerous Member States - Art. 19 (1) TFEU, the EU’s power to adopt many non-discrimination laws. The latter provision underlines the Marrakesh Treaty’s objective to promote non-discrimination, equal opportunity, accessibility and participation of disabled persons in the society. Despite the implication of exclusivity, the choice of Art. 19 (1) TFEU entails important procedural consequences: As the provision stipulates that the adoption of EU legislation requires unanimity in the Council, EU treaty-making under the anti-discrimination power equally grants the Member States veto powers in the Council (Art. 218 (8) TFEU).

The Court‘s position in Opinion 3/15

In order to answer the preliminary question, the Court, first, examined whether the Marrakesh Treaty, in full or in part, falls within the scope of the CCP. Thereafter, the ECJ analysed whether exclusivity can be implied within the meaning of Art. 3 (2) TFEU.

The reach of “commercial aspects of intellectual property rights”

To start with, the Court recalled that according to settled case-law, an EU act falls within the CCP “if it relates specifically to international trade in that it is essentially intended to promote, facilitate or govern trade and has direct and immediate effects on trade” (Daiichi Sankyo). Conversely, the mere fact that an EU act is liable to have implications on international trade is not enough for it to be concluded under the CCP.

In its subsequent reasoning, the Court outlined that neither one of the aforementioned instruments of the Marrakesh Treaty intends to promote, facilitate or govern international trade. The Court’s Opinion is particularly striking with regard to the import and export of format copies, as “there is no doubt that those rules relate to the international trade of such copies” (para 87). Nevertheless, the Court stated that the cross-border exchange specified by the Marrakesh Treaty cannot be equated with international trade for commercial purposes. On the one hand, the objective of the circulation and exchange of format copies is non-commercial in nature. The Marrakesh Treaty solely uses cross-border transactions as a mean to improve access of beneficiary persons to accessible format copies and not to promote, govern or facilitate trade. On the other hand, the Marrakesh Treaty’s non-commercial character results from the fact that it does generally not stipulate trade for profit.

Indeed, the Marrakesh Treaty provides that trade in format copies covers only authorised entities, which operate on a non-profit basis and provide their service to beneficiary persons alone. According to AG Wahl, the non-profit basis of trade in format copies, is, however, irrelevant for the application of the CCP. To that extent, the AG proposed a very broad definition of commercial aspects of intellectual property rights (IPR), which Article 207 (1) TFEU expressly includes within the scope of the CCP. In his view, the CCP does not exclude from its ambit transactions or activities of a non-commercial nature as the mere exchange of goods and services implies that they are being traded. Instead, Art. 207 (1) TFEU excludes non-commercial aspects of IPR, i.e. issue areas that are not strictly or directly concerned with trade in their entirety, such as moral rights.

The Court, however, rejected the claim that commercial aspects of IPR carve out only those rules relating to moral rights. Such a broad interpretation would, in the eyes of the Court, “lead to an excessive extension of the field covered by the common commercial policy by bringing within that policy rules that have no specific link with international trade.” (para 85) Consequently, the ECJ concluded that the Marrakesh Treaty falls outside the ambit of the CCP.

Implied exclusivity and the “ERTA doctrine”

Subsequently, the Court analysed whether exclusivity can nevertheless be implied via the well-known “ERTA doctrine” (referring to the Court’s ERTA judgment), which is codified in Article 3 (2) TFEU. According to this doctrine, EU obtains exclusive treaty-making powers where the conclusion of an international agreement “may affect common rules or alter their scope”.  In its ERTA line of case law, the Court has developed a two-level test for establishing external Member State pre-emption: First, it conducts a “comprehensive and detailed analysis” to determine whether the provisions of the envisaged agreement are largely covered by common EU rules (Opinion 2/91). Second, it determines whether the conclusion of the international agreement affects the “uniform and consistent application” of these common EU rules “and the proper functioning of the system which they establish.” (Opinion 1/13, discussed here).

There was little disagreement between the parties that the Marrakesh Agreement had to be implemented within the framework of Directive 2001/29 on the harmonisation of certain aspects of copyright and related rights in the information society.  The Court, however, pointed out that “it is clear (..) that the EU legislature brought about only a partial harmonisation of copyright and related rights, given that the directive is not intended to remove or to prevent differences between national laws which do not adversely affect the functioning of the internal market.” (para 115) Indeed, Directive 2001/29 provides, within its harmonized legal framework, for considerable Member State discretion as regards the implementation of exceptions and limitations to distribution for the benefit of people with disabilities. Does such a residual Member State competence mean that the Marrakesh Treaty is not largely covered by common EU rules, and therefore prevent implied exclusivity?

The Court answered this question in the negative. Directive 2001/29 subjects the Member States’ remaining competence to a number of conditions. The Member States’ discretion can therefore only be exercised within the limits enjoined by EU law, so that the Member States “are not free to determine, in an un-harmonised manner, the overall boundaries of the exception or limitation for persons with a disability.” (para 122) Moreover, the Marrakesh Treaty – unlike Directive 2001/29 – imposes an obligation on the contracting parties to provide for an exception or limitation. The Member States are therefore mandated to comply with the restraints imposed by EU law. As a result, the Court concludes that independent external Member State action would affect common EU rules. The EU is therefore exclusively competent to conclude the Marrakesh Treaty.

Opinion 3/15 and EU treaty-making: A short analysis

As stated in the introduction, the Court’s finding of (implied) exclusivity does not come as a surprise to many observers. Neither does the broad interpretation of the “largely covered” part of the ERTA-test. After all, the Court already confirmed in Opinion 1/03 and, more recently, in Green Network, that considerable Member State discretion in the implementation of EU legislation does not rule out exclusivity. Nevertheless, as was pointed out by AG Wahl, the case law “begs the question: when is an area sufficiently covered by EU rules to exclude Member State competences to act externally?” (para 130 of the opinion) By inference, to what extent does the EU have to exercise its internal competence to trigger the “ERTA effect”?

Green Network and Opinion 3/15 suggest that the Court will place much greater emphasis on the effects of international agreements on common EU rules, rather than on the extent of their material overlap. Even if the EU law in place specifies residual Member State powers, and is therefore, arguably, not largely harmonised, (adverse) affects on the EU’s internal legal framework suffice to trigger implied exclusivity within the meaning of Art. 3 (2) TFEU. However, if the Member States may be pre-empted where an agreement is only partially covered by EU internal legislation, may they be also pre-empted where the EU cannot exercise its internal competence at all, provided always that the envisaged agreement clearly affects the EU law in force? The Court is expected to answer this question in its pending Opinion 2/15 on the conclusion of the EU-Singapore Free Trade Agreement (discussed here). Here, among other things, the Court is asked to determine whether the “ERTA effect” may exceptionally be triggered by EU primary law provisions.

The Court’s clarification of the scope of Art. 207 (1) TFEU, and in particular, “commercial aspects of IPR”, might also have some impact on future EU treaty-making. Opinion 3/15 shows that the mere exchange of goods or services cross-border is not enough to equate a measure with international trade for commercial purposes. Instead, a link with trade implies that the transaction or activity aims at fulfilling a commercial objective. By inference, using trade as a mean to fulfil non-commercial objectives is not enough to bring a measure within the scope of the CCP. While the Court did not entirely exclude that “commerce” may, on a case-by-case basis, include trade on a non-profit basis, it contrasted AG Wahl’s suggestion that Art. 207 TFEU generally encompasses transaction or activities of a non-commercial nature. In view of Opinion 2/15, which also raises this issue, it may be noted that the Court did not dispute the AG’s claim that moral rights fall outside the scope of the CCP.

When returning to the Marrakesh Treaty, Opinion 3/15 leaves another pressing question unanswered: What is the correct legal basis for the agreement’s conclusion? The Court only clarifies that the Council Decision on the signature of the Marrakesh Treaty was wrongfully based on Art. 207 TFEU, but does not further elaborate on the correct choice of legal basis. It is true that the Commission’s preliminary question is confined to the exclusive nature of the agreement. The choice of legal basis, nevertheless, qualifies the modus operandi of (exclusive) EU treaty-making. In particular, the Court refrains from discussing AG Wahl’s reference to Art.  19 (1) TFEU, and, more broadly, the effects of the non-discrimination principle on EU external action. Whilst clarifying the EU’s capacity to conclude the agreement alone, the choice of legal basis – and therefore the choice of procedure – is left to the discretion of the EU institutions. Throughout the proceedings, the Commission continued to assert that the Marrakesh Treaty should be based on Art. 114 TFEU instead of Art. 19 TFEU. Conversely, the majority of the intervening Member States sided with the AG. As the use of Art. 19 (1) TFEU would trigger unanimous Council voting, and therefore Member State veto powers in the Council, institutional debate over the conclusion of the Marrakesh Treaty might continue.

Barnard & Peers: chapter 24

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AG Kokott rejects challenges to the validity of the Tobacco Products Directive – implications for standardised packaging legislation in the Member States?

Jonathan Griffiths, Reader in Intellectual Property Law, Queen Mary University of London

The Tobacco Products Directive (Directive 2014/40/EU, revising Directive 2001/37/EC) imposes stringent controls on the marketing of tobacco products. It introduces, inter alia, a requirement for cigarettes and hand-rolling tobacco to carry more prominent picture and text health warning, further regulatory controls on the marketing of tobacco products (including e-cigarettes) and a prohibition on the marketing of tobacco products with “characterising flavours” (including menthol cigarettes).

On 23^rd December, Advocate General Kokott delivered her Opinions in three cases concerning the validity of various provisions of the Directive. In (C-358/14) Republic of Poland v Parliament &Council, Poland seeks annulment of the Union-wide prohibition on menthol cigarettes. Both other cases are requests for a preliminary ruling made in judicial review proceedings by the High Court of England and Wales. (C-477/14) Pillbox 38 (UK) Ltd was referred in a case concerning the domestic implementation of the Directive’s rules concerning e-cigarettes. In the national proceedings in (C-547/14) Philip Morris Brands SARL, in a challenge described by the Advocate General as “a kind of general onslaught”, tobacco companies call into question the domestic implementation of several of the Directive’s provisions. In all three Opinions, the Advocate General advises the Court comprehensively to reject the challenges to the Directive’s validity.

This blogpost focuses on the Opinion in Philip Morris Brands SARL. It outlines the Advocate General’s conclusions on the various questions referred by the High Court and then move on to reflect on that Opinion’s potential implications for current disputes concerning the introduction of legislation requiring fully standardised packaging for tobacco products by some Member States (notably, the United Kingdom, Ireland and France).

(C-547/14) Philip Morris Brands SARL

Phillip Morris (and British American Tobacco) (“the tobacco companies”) brought a claim for judicial review against the Secretary of State for Health, seeking to prevent the implementation of the Directive.  They challenge the Directive on a variety of grounds. They claim, first, that Art 114 does not provide an adequate legal basis for several provisions of the Directive. Secondly, they argue that the Directive violates the principle of proportionality, particularly when viewed in the light of the Union legislature’s obligation to respect their fundamental rights under the EU Charter of Fundamental Rights. Thirdly, they argue that the Directive improperly delegates certain powers to the Commission and, as a result, violates Arts 290 and 291 TFEU. Finally, they claim that the Directive breached the principle of subsidiarity.

While the Secretary of State considers the Directive to be valid, he took the view that the Court of Justice had exclusive jurisdiction to assess its validity. In such circumstances, the High Court simply referred a list of questions concerning the companies’ challenge to the Court of Justice for a preliminary ruling.

Admissibility

Palpably irritated by some aspects of the reference, Advocate General Kokott advised the Court that, in her view, several of the referred questions are inadmissible. A number of the referred questions concern the companies’ challenges to those provisions of the Directive which provide latitude for Member States to adopt more stringent national tobacco control measures than those set out under the Directive (including “standardised packaging” under Art 24(2)). In the absence of the actual adoption of any national measures, the Advocate General considered that, such questions are hypothetical. [37]-[43]. Secondly, several of the referred questions relate to powers delegated to the Commission under the Directive. However, the proceedings before the national court concern only the United Kingdom’s intention and duty to implement the Directive and therefore any questions concerning the Commission’s role are also inadmissible at this stage. [44]-[47]. Thirdly, the national court had raised certain questions about the compatibility of the Directive with the principle of subsidiarity. However, the nature of any such alleged incompatibility was not explained at an adequate level of detail and such questions were therefore, save in one limited respect, also inadmissible. [48]-[51]. Despite the fact that the Advocate General considered these referred questions to be inadmissible, she went on to provide her views on their substance in the alternative (see below).

Even where admissible, the referred questions did not escape criticism. The Advocate General was particularly concerned that the High Court had generally provided a very limited description of the relevant arguments relating to the questions referred [32]-[34]. In effect, the national court appears to have had done little more than convey the text of the tobacco companies’ challenge without making any significant attempt to come to its own view on the various questions. In noting that the companies’ claims were “reasonably arguable”, the national court had done the “absolute minimum” necessary to render the remaining questions admissible [21]-[30].

Art 114 TFEU as legal basis for provisions of the Directive

In a well-established formula, the Advocate General initially noted that recourse to Article 114 TFEU as the legal basis for Directive 2014/40 could not be called into question simply because, in addition to improving the functioning of the internal market for tobacco and related products, the Directive also pursued a high level of health protection as a goal. [56] She then went on to assess each challenge under Art 114 TFEU in turn. They focused on provisions of the Directive which (i) prohibit the marketing of tobacco products with a characterising flavour (Art 7); (ii) regulate the labelling and packaging of tobacco products (Arts 8-16);  (iii) grant Member States freedom to introduce further standardisation of the packaging of tobacco products (Art 24(2)) and to prohibit certain categories of tobacco product for reasons relating to the specific situation in a Member State (Art 24(3)); (iv) give Member States the option to prohibit cross-border distance sales of tobacco products to consumers (Art 18(1)); and (v) authorise the Commission to implement certain internationally agreed standards on a continuing basis (Arts 3(4) & 4(5)).

The Advocate General considered that, if these provisions are interpreted appropriately, Art 114 TFEU provides an adequate legal basis for the Union legislature’s activity. Relevant current and future obstacles to trade exist and the contested provisions will improve the functioning of the internal market. Undoubtedly, where tobacco products are prohibited, the Directive is not capable of improving the functioning of the internal market for those products. However, it is recognised in the Court’s jurisprudence that Article 114 TFEU grants the Union legislature the power to prohibit the placing on the market of a certain product if this helps to improve trading conditions for a class of other products [54]-[144].

Proportionality

In the national judicial review proceedings, the tobacco companies challenged the proportionality of two aspects of the Directive - the prohibition on the marketing of tobacco products with characterising flavours and the regulation of the labelling and packaging of such products. In accordance with established jurisprudence, the Advocate General noted that the principle of proportionality:

“..requires that acts of the EU institutions be appropriate for attaining the legitimate objectives pursued by the legislation at issue and do not go beyond what is necessary in order to achieve those objectives;… when there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued…” [146]

In assessing proportionality, the Court is obliged to take fundamental rights into account wherever relevant.

In the national court, the tobacco companies claimed that many of the contested provisions of the Directive interfere disproportionately with their freedom to conduct a business (Art 16, EU Charter). In examining these claims, the Advocate General noted that the Union legislature has a broad discretion to interfere with the right to conduct a business where it acts in an area, such as that of tobacco control, which involves political, economic and social choices and in which it is called upon to undertake complex assessments and evaluations. This was particularly so where the Union legislature acted to achieve a high level of health protection in the European internal market. In such circumstances, legislative activity will only be invalid if it is manifestly inappropriate for attaining the legitimate objectives pursued, goes manifestly beyond what is necessary to achieve those objectives or entails disadvantages which are manifestly disproportionate to its objectives. [149]-[150]

In this light, and in view of the precautionary principle [155]-[160], the Advocate General did not consider that the contested measures constitute a disproportionate interference with the tobacco companies’ freedom to conduct a business. A number of less intrusive means of satisfying the legislature’s health goals had been suggested by the tobacco companies. These included the imposition of age limits on the sale of cigarettes with characterising flavours and the launching of information campaigns about the dangers of tobacco products. However, in the Advocate General’s view, these would clearly be less effective than the measures adopted under the Directive. In considering proportionality in the strict sense, she acknowledged that the contested provisions would have an adverse economic impact on some undertakings. However, she noted that transitional periods were available under the Directive and, in any event:

“It should be borne in mind…that the protection of human health has considerably greater importance in the value system under EU law than such essentially economic interests (see Articles 9 TFEU, 114(3) TFEU and 168(1) TFEU and the second sentence of Article 35 of the Charter of Fundamental Rights), with the result that health protection may justify even substantial negative economic consequences for certain economic operators.” [179][204]

This being so, the contested provisions did not interfere disproportionately with the companies’ freedom to conduct a business. 

The national court also referred a question concerning the proportionality of Art 13 of the Directive with the tobacco companies’ right of freedom of expression under Art 11 of the Charter. Art 13 prohibits elements of labelling on the packaging of tobacco products that give rise to a number of specified effects, including those that (i) promote a tobacco product or encourage its consumption by creating an erroneous impression about its characteristics, health effects, risks or emissions; (ii) those that suggest that a particular tobacco product is less harmful than others or aims to reduce the effect of some harmful components of smoke or has vitalising, energetic, healing, rejuvenating, natural, organic properties or has other health or lifestyle benefits and (iii) those that suggest economic advantage. The Advocate General interpreted this provision as prohibiting both true and false statements on product packaging where those statements, viewed objectively, are capable of producing one or more of the designated effects:

“An ‘organic cigarette’ is still a product that is extremely harmful to health. Information on the product packaging should not suggest even to consumers who are aware of the health risks of smoking — even merely subconsciously — that it is desirable for them or beneficial to the environment to smoke ‘organic cigarettes’. In addition, any poor conscience on the part of smokers on account of the health risks associated with the consumption of tobacco products should not be appeased by the fact they are doing something good for themselves or for the planet by turning to ‘organic cigarettes’ rather than conventional cigarettes.” [222]

Nevertheless, even when interpreted expansively in this way, Art 13 does not constitute a disproportionate interference with the tobacco companies’ right of freedom of expression. The Union legislature has less freedom of manoeuvre in restricting freedom of expression than it has in interfering with the right to conduct a business. The European Court of Human Rights has for some time subjected restrictions to commercial communications to a detailed proportionality enquiry and the Court of Justice should do likewise. However, according to the Advocate General, the constraints imposed by Article 13(1) were not disproportionate to the health protection objectives pursued, particularly as the products at issue entail considerable health risks [211]- [237].

Improper delegation of powers to the Commission

Under Art 290(1) TFEU, the Union legislature may delegate the power to adopt non-legislative acts of general application to supplement or amend a basic legislative act to the Commission and, under Art 291TFEU, the legislature may delegate the power to adopt measures that implement legislation to the Commission. The referring court asked whether, in passing provisions of the Directive, the Union legislature had exceeded the limits of these powers of delegation; in particular, because a number of the powers delegated were either legislative in nature or were unreasonably vague. The Advocate General considered any such criticisms to be ill-founded [238]-[269].

The principle of subsidiarity

Under the principle of subsidiarity, as enshrined in Art 5(1) TEU in conjunction with Article 5(3) TEU, in areas which do not fall within its exclusive competence, the Union may act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level [271]. As noted above, in large part, the questions referred by the national court on the application of the subsidiarity principle were considered to be inadmissible by the Advocate General because they had not been presented in sufficient detail. The only admissible question on subsidiarity was given short shrift by the Advocate General, who was strongly of the view that action to control tobacco products with characterising flavours could not be achieved at national level and that the Directive’s objectives in this regard could be better achieved at Union level.

In addition to this challenge on substance, the national court had asked whether the Union legislature had provided an adequate statement of reasons for the Directive in the light of the principle of subsidiarity, suggesting that the legislature had simply asserted compliance with the principle of subsidiarity in a formulaic manner. That being the case, a question arose as to whether the Directive was vitiated by a defective statement of reasons. In considering this question, the Advocate General noted that:

“Where compliance with the principle of subsidiarity is under examination, it must be clear from the statement of reasons for the EU measure whether the Union legislature gave sufficient consideration to questions relevant to the principle of subsidiarity and, if so, what conclusions it reached with regard to subsidiarity.” 

She agreed that Recital 60 of the Directive was an “empty formula”. However, this did not necessarily mean that the measure was invalid because aspects relevant to the issue of subsidiarity were also to be found in other recitals, even if those recitals do not themselves make express reference to the principle of subsidiarity . Furthermore, it was not necessary for the justification for a Union measure in the face of the principle of proportionality to be completely evident in the contested legislative measure itself. Here, for example, justification for the Union’s legislative action could be found in the Explanatory Memorandum for the Commission’s Proposal for a Directive and in the comprehensive preparatory work by the Commission staff in connection with the impact assessment for the Directive. As a result, the legislative institutions had adequate material on which to base their evaluation of compliance with the principle of subsidiarity [270]-[301]. Nevertheless, according to the Advocate General:

“...it is strongly advisable that in future the Union legislature avoids set formulas like the one contained in recital 60 in the preamble to the Directive and instead enhances the preamble to the EU measure in question with sufficiently substantial statements regarding the principle of subsidiarity which are tailored to the measures in question. [301]

Implications for standard packaging legislation in the Member States

If the Court follows Advocate General Kokott’s guidance, the most controversial provisions of the Tobacco Products Directive will comprehensively withstand the tobacco industry’s “general onslaught”. However, the industry’s legal challenge to tobacco control legislation in Europe will certainly not end there. As explained above, Art 24(2) of the Directive provides that:

“This Directive shall not affect the right of a Member State to maintain or introduce further requirements, applicable to all products placed on its market, in relation to the standardisation of the packaging of tobacco products, where it is justified on grounds of public health, taking into account the high level of protection of human health achieved through this Directive. Such measures shall be proportionate and may not constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States...”

The United Kingdom and Ireland have already taken advantage of this freedom to enact comprehensive standardised packaging legislation (see the Standardised Packaging of Tobacco Products Regulations2015 and the Public Health (Standardised Packaging of Tobacco) Act 2015 respectively). France has committed to follow suit.

Under such laws, tobacco products must be sold in drab-coloured packaging without any branding other than a written indication of the brand and variant under which the product is sold. While the UK and Irish provisions are not set to come into force until May, they have already been challenged by the tobacco industry in judicial review proceedings. In the United Kingdom, the High Court heard the industry’s challenge in December and judgment is expected soon. The industry argues, amongst other things, that the domestic legislation interferes with the principle of freedom of movement of goods, breaches European trade mark law and violates a number of their fundamental rights.

(C-547/14) Philip Morris Brands SARL does not concern Member State standardised packaging legislation and, indeed, as we have seen, the national court’s questions on the validity of Art 24(2) have been considered inadmissibly hypothetical. Nevertheless, if endorsed by the Court, the views of the Advocate General may have important implications for the outcome of the domestic challenges to the legality of the UK and Irish legislation.

National court not simply to refer tobacco companies’ challenges without attempting to reach its own view

The tobacco industry has deep pockets and resists tobacco control measures by all means possible. In the domestic proceedings in (C-547/14) Philip Morris Brands SARL, the industry clearly threw the kitchen sink at the Directive. In such circumstances, it is perhaps not surprising that the domestic judge largely satisfied himself with establishing that the claims were arguable before passing them swiftly on to the Court of Justice. Nevertheless, the Advocate General’s strongly-worded criticism must make it more likely that the High Court judge currently considering the challenge to the UK’s standardised packaging regulations will attempt resolve the industry’s multiple claims himself rather than simply referring them to the Court.

Free movement of goods

In (C-547/14) Philip Morris Brands SARL, the tobacco companies suggested that Art 24(2) could not properly be based on Article 114 TFEU because it allows Member States to undermine the free movement of goods by introducing more stringent rules than those laid down at Union level. As has been indicated above, the national court’s question on this issue was considered inadmissible. Nevertheless, in the alternative, the Advocate General suggested that Art 114 TFEU provided an appropriate legal basis for Art 24(2). Properly interpreted, this provision permitted Member States to adopt “further requirements” only in so far as the Union legislature itself has not carried out harmonisation. As such, Art 24(2) simply made it clear that the Directive was only partially harmonising. [105]-[120]. On this basis, the Advocate General indicated that it ought to be possible for Member States to introduce fully standardised packaging legislation at national level:

“…[T]he Member States remain free, in particular, to lay down their own requirements as to colours of all parts of the packaging which are not reserved for warnings, extending as far as the standardisation of packaging….Colouring is regulated — indirectly — in the Directive at most in so far as Article 13 prohibits tobacco products being given a misleading or deceptively positive presentation.” [113]

Such national legislation would, of course, introduce new obstacles to trade and the question of proportionality would be crucial in determining whether the interference with the principle of free movement of goods which they create can be justified. Again, on this issue, the Advocate General’s Opinion offers interesting insight.

Proportionality and fundamental rights

Formally at least, the proportionality of national legislation must, be examined against a stricter standard than that applied generally by the Advocate General in (C-547/14) Philip Morris Brands SARL (“manifest disproportionality”). There are also differences in the factual and policy contexts of the two disputes. Nevertheless, there are many indications in the Opinion that suggest that, in principle, national standardised packaging legislation will survive review for compatibility with the proportionality principle in Union law.

Logically, a Member State legislature ought also to benefit from discretion to legislate in an area, such as tobacco control, which involves political, economic and social choices and in which complex assessments and evaluations must be undertaken and the “precautionary principle” ought to apply where national legislation aims to achieve important public health objectives against a background of scientific evidence that is, to some degree, uncertain. More particularly, however, the Advocate General’s Opinion indicates considerable scepticism about some of the arguments upon which the industry has relied heavily in the judicial review of the standardised packaging regulations in the United Kingdom.

She was clearly not persuaded by claims that an alleged increase in the trade in counterfeit tobacco products resulting from standardised packaging legislation renders such legislation disproportionate. [84]-[85]; [182]. Perhaps even more importantly, she rejected, with some disdain, the argument that standardised packaging legislation will be ineffective in dissuading people (and particularly young people) from smoking; noting that plainer packaging will remove some of the “coolness or fun factor that may be associated with unusual or particularly striking packaging and the curiosity that may be inherent in new or unusual packaging…” [191].

Conclusion – the role of fundamental rights

In lobbying on, and litigating against, standardised packaging legislation, the tobacco industry has placed considerable reliance on its fundamental rights. However, the Opinion in (C-547/14) Philip Morris Brands SARL suggests that the presentation of its arguments within the framework of the Charter is unlikely to have a conclusive impact on the outcome of its challenge to standardised packaging legislation. The right to conduct a business is clearly very readily outweighed in the public interest and, even if the restriction of the industry’s right to apply its trade marks is framed as an interference with property under Art 17 of the Charter, little significant difference would appear to be made to the assessment of proportionality in this instance (see (C-477/14) Pillbox 38 (UK) Ltd [194]-[201]). Even arguments based upon the more potent right of freedom of expression are unlikely to prevail. Ultimately (and perhaps unsurprisingly), all such claims face the same obstacle. In the Advocate General’s words:      

“Certainly, the standardisation of the shape, size and minimum content of cigarette packets brought about by the Directive means a loss of diversity, marketing opportunities and competitive potential for manufacturers of tobacco products. However, the purely economic interest in the greatest possible inter-product and inter-brand competition must be secondary to the protection of human health, which, as has already been stated, has considerably greater importance in the value system under EU law…” [193]-[204].

This, however, is not the only interesting point to be made about the Union’s fundamental rights framework. More generally, there are also a couple of features of the Opinion which indicate that the Court’s jurisprudence on the application of the Charter may not yet be fully established. First, while the Advocate General referred to the right to health care protected under Art 35 of the Charter as designating a public interest of very high importance, she did not examine the legitimacy of the various contested provisions by reference to the need to establish a “fair balance” between competing rights of equivalent status. Instead, she sought strictly to determine the proportionality of the Union legislature’s interference with the tobacco companies’ protected rights. This approach might have been employed as a result of the manner in which the national court had referred its questions. However, in other cases, the Court has employed a “fair balance” framework and this diversity of approach indicates a significant ambiguity at the heart of its fundamental rights jurisprudence.

Another interesting feature of the Opinion relates to the concept of the “essence” of protected fundamental rights. Under Art 52(1):

Any limitation on the exercise of the rights and freedoms recognised by this Charter must…respect the essence of those rights and freedoms.

  

In this context, “essence” appears to indicate an irreducible minimum of protection. However, the exact function of this concept has yet to be explained clearly by the Court. This uncertainty seems apparent in the Opinion. Following a thorough assessment of the proportionality of the Directive’s interference with the right of freedom of expression, the Advocate General provides only the following briefest of afterthoughts:

“The essence of freedom of expression (first sentence of Article 52(1) of the Charter of Fundamental Rights) is likewise not affected if commercial communications by undertakings which are intended solely to promote sales are restricted by an EU legislative act” [236].

The lack of further explanation here perhaps again indicates another aspect of the Court’s fundamental rights jurisprudence awaiting further elaboration.

Barnard & Peers: chapter 5, chapter 11, chapter 12

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