Measuring the Influence of the Advocate General on the Court of Justice of the European Union: Correlation or Causation?

Carlos Arrebola and Ana Julia Mauricio (PhD students at the University of Cambridge)

‘[Advocate General] opinions are usually followed by the EU court’. 

‘The advocate general’s opinion is usually quite influential in helping the ECJ decide its cases’. ‘The opinion does not mean the court will automatically dismiss the legal challenge […], but most judgments later endorse the position of advocate generals’. 

A quick search on The Guardian webpage reveals that it is commonly acknowledged that the Advocate General influences the Court, or that the Court follows the opinions of the Advocates General. Even conversations amongst EU lawyers, practitioners and academics alike are often based on the omnipresent presumption that the Advocate General influences the Court, which seems to have become a truth by repetition. However, has data been put forward proving this dogma? Is it true that the Advocates General opinions have such an important weight in the judgments of the Court? Answering these questions becomes more relevant than ever as the number of Advocates General increases, and so does the workload of the Court. Answers to these questions are precisely what we set out to discover in our recent study ‘An Econometric Analysis of the Influence of the AdvocateGeneral on the Court of Justice of the European Union’, now available on SSRN, and soon to be published in the Cambridge Journal of International and Comparative Law (2016) 5(1).

One of the first hurdles that we had to overcome in this study was defining the terms that were used, such as ‘influence’ or ‘following’. What does it mean for the Court to follow the Advocate General: would reaching the same outcome suffice? However, the Advocate General and the Court could come the same conclusion albeit following a different legal reasoning. What if a particular case had such a clear solution that it would not be legally acceptable to decide differently? Would the Court be following the Advocate General then, or would the Court be deciding regardless of the opinion of the Advocate General? We realised that what underpins these questions is the very essence between correlation and causation.

In this study, we were particularly interested in trying to establish causation, i.e., we wanted know how often the Court makes a decision based solely on the opinion of the Advocate General, as opposed to other possibly influential factors. This would give us a measure of the actual influence that the figure of the Advocate General has on the Court of Justice. We tested the hypothesis of whether Advocates General opinions are very influential to the Court’s decisions, or whether this claim could be disproven with data, and the relationship between the Court and the Advocate General is based more on a dialogic conversation than in a relationship of influence. The existing literature gave some measures for correlation between the opinions of the Advocate General and the judgments of the Court using descriptive statistics, showing that they coincided around 70% of the time.

In order to verify the accuracy of such claims and give and evidence-based response to our queries, we gathered data spanning 20 years of actions for annulment before the Court of Justice. In addition to the outcome suggested by the Advocate General and the actual outcome of a case, we collected data regarding several variables that could have influenced why the Court solved a case in a particular way. For example, we selected variables representing whether the solution of a case was clear. We recorded the subject-matter of the case, given that certain areas of EU law might be less controversial than others. Accounting for such variables, we eliminated from our measure of influence what is actually a coincidence caused by external elements that are unrelated to the opinion of the Advocate General. We also included in our database variables relating to who the Advocate General was; who the claimant was; the composition of the Court; and the type of act that was being reviewed.

We acknowledge that more variables could have been included to further refine this econometric study. However, it is not possible to record all such variables, for example, the mood of the judge at the time of the decision. Nevertheless, we designed an econometric study and used regression models that gave a robust measure of influence. In particular, our models determined a statistically significant result on the variable of interest (the opinion of the Advocate General). Our findings suggest that the Court of Justice is around 67% more likely to annul an act if the Advocate General advises the Court to annul than if the Advocate General recommends the Court to dismiss the case or declare it inadmissible.

Our results reinforce claims that the Advocate General is a powerful figure in the makeup of the Court of Justice, influencing the development of EU law. These findings raise several questions for further research as regards judicial independence and the relevance of the figure of the Advocate General. For instance, if the opinions of the Advocates General have such a determinant influence in the Court’s decisions, can one say that the Court is truly independent? Is it relevant that the identity of the Advocate General in each case is publicised, or is the Advocate General insulated from external pressures? Issues like these are briefly discussed at the end of our article. Ultimately, we hope to have contributed to an evidence-based debate on this topic, providing a grounded basis for future discussions and judicial reform.

Barnard & Peers: chapter 10

Photo credit: inforrm.wordpress.com

Maxima Latvija: Non-compete clauses in commercial lease agreements are ‘by object’ competition restrictions

Michele Giannino (Italian qualified lawyer: LL.M. Leicester, Ph.D London)

In a preliminary reference judgment recently handed down in the Maxima Latvija case, the Court of Justice of the EU (CJEU) has ruled out that commercial lease agreements with a clause conferring on the tenant the right to approve the lease agreements that the property owner may conclude with third parties is a competition restraint by object. Therefore, a full analysis of the economic effects of the agreements in question is necessary to establish whether they breach competition. The CJEU has then set out the criteria to be applied to examine the competition impact of the agreements. This blogpost reviews the line of reasoning followed by the CJEU and also gives an insight into the implications of the judgment for property owners and retailers.

The legal issues

As is known, Article 101 TFEU prohibits agreements between undertakings that have as object to restrict competition or have restrictive effects on competition. The distinction between anti-competitive agreements that are infringements by ‘object’ and those that are infringements ‘by effect’ is relevant for the allocation of the burden of proof between the acting competition authority and the parties to the agreements. Where a given agreement is found to have as an object to restrict competition, a competition infringement is established, provided that the other requirements set out in Article 101(1) TFEU are met. In order to escape the ensuing competition liability, the parties have to apply for the exemption in Article 101(3) TFEU and prove that all the conditions laid down in this provision are fulfilled. On the contrary, where an agreement is categorized as a restriction by effect, the acting competition authority has the evidentiary burden to demonstrate the negative effects of the agreement on competition. When the anti-competitive effects are proved, the evidentiary burden is shifted to the parties that, to their defence, can submit the economic efficiency argument in Article 101(3) TFEU[1].

Though horizontal agreements to fix prices or reduce capacity are more likely to be considered as restrictive by object (European Night Services), also vertical agreements have been found to fall within the category of object restraints. This was the case of resale price maintenance arrangements (Binon v AMP) and distribution agreements that award distributors an absolute territorial protection (Costen and Grundig). It was, however, uncertain whether commercial lease agreements that contain covenants limiting the freedom of property owners to rent to the tenant’s competitors could be considered as a competition restraint by object or by effects. The Maxima Latvija judgment deals with this issue.

Facts

Maxima Latvija is a major retailer in Latvia where it runs a chain of large shops and hypermarkets. It concluded a number of commercial lease agreements with owners of shopping centres to rent commercial spaces within such malls. Some of these agreements included a non-compete clause in favour of Maxima Latvija. As ‘anchor tenant’, Maxima Latvija was awarded the right to agree to the lessors letting third parties other shops than those rented to Maxima Latvija in the same shopping centres where the tenant was already present. In essence, the property owners undertook an exclusivity obligation in favour of the anchor tenant, not being allowed to conclude a lease agreement with the competitors of Maxima Latvija without its consent.

Unsurprisingly, this exclusivity arrangement attracted the attention of the Latvian Competition Authority (LCA). The LCA believed that the agreements containing the non-compete clause infringed Article 11(1)(7) of the Latvian Competition Law, which corresponds to Article 101 TFEU. Considering the market power of Maxima Latvija in the retail market, the LCA took the view that the contested agreements were anti-competitive in nature. According to the LCA, the purpose of the contested agreement was to restrain competition by undermining the ability of competing retailers to enter the market. Therefore, the LCA made an infringement decision, imposing on Maxima Latvija a fine of about € 35,000.00, without being necessary to establish whether the contested clauses had any restrictive effects on competition.

  

Maxima Latvija appealed the infringement decision of the LCA before the regional administrative court and then before the Latvia Supreme Court. Given the similarities between Article 11(1)(7) of the Latvian Competition Law and Article 101 TFEU and being uncertain whether the contested agreements should be categorized as by object or by effect competition restraints, the Latvian Supreme Court stayed proceedings and referred the matter to the CJEU for a preliminary ruling pursuant to Article 267 TFEU.

Analysis

In practice, what the Latvia Supreme Court asked the CJEU was whether the commercial lease agreements including a non-compete clause in favour of the tenant amounted to an object restraint of competition; if it was not the case, the Latvia Supreme Court asked whether such agreements constituted a competition restraint by effect and which test should be employed to ascertain whether the agreements had negative effects on competition.

To address the first question, the CJEU followed the same restrictive approach to the concept of competition restraint by object it had taken in its previous judgment in Cartes Bancaires. The CJEU reminded that only arrangements with a sufficient degree of competition harm fall within the category of by object restraint. That said, in Maxima Latvija the CJEU noted that the contested agreement was a vertical agreement concluded by firms, a retailer and a property owner, that did not compete with each other. Vertical agreements are not normally considered as anti-competitive by their very nature. Then, the CJEU considered whether the contested agreements could lead to foreclose the competitors of Maxima Latvija by impeding the other retailers from having access to the malls where Maxima Latvija was already trading.

The CJEU acknowledged that the agreements could have the potential to have anti-competitive effects in the shape of market foreclosure. Next, however, the CJEU pointed out that the fact that the agreements at hand might have such foreclosing effects, if established, did not imply clearly that the agreements distorted or restricted, by their very nature, the competition in the relevant markets. Therefore, bearing in mind the economic context where the lease agreements applied and their contents, the CJEU concluded that the harm inflicted by the agreements to competition was not of such degree to qualify the agreements at hand as an object competition restraint for the purpose of Article 101 TFEU.

To deal with the second question put by the Latvian Supreme Court, the CJEU applied the test it had employed in the Delimitis case. This test requires a full analysis of the economic and legal context of the agreements and the competition conditions in the relevant market in order to establish whether the agreements have negative effects on competition. This is a two-limb test, the first step of which consists in the examination of all the factors affecting the access to the relevant market. The purpose of this exercise is to ascertain whether competitors may establish themselves in the catchment areas of the malls covered by the contested agreements, either by renting a shop in the nearby malls or in premises that are outside shopping centers. Whether commercial land in the catchment areas concerned is available and whether there are economic, administrative or regulatory entry barriers are all factors to be considered as well. As far the competition conditions of the relevant markets are concerned, it is necessary to look at the number and size of the retailers trading in the markets, the degree of market concentration as well as customer fidelity to existing brands and consumer habits.

The second limb of the Delimitis test kicks in when, with the above described thorough analysis of the economic and legal context where the contested agreements applied, it has been established that the competitors’ market access is frustrated by those agreements and similar agreements. Thus, under this second limb of the test, the acting competition authority has to assess whether the contested agreements have given an appreciable contribution to the cumulative foreclosing effect to the detriment of competitors. In that regard, factors such the market position of the parties and the duration of the agreements must be taken into consideration.

Practical significance

In Maxima Latvija the CJEU confirmed its strict position in Cartes Bancaires as for the definition of the category of competition restraint by object. Contrary to was found by the LCA, the CJEU held that restrictive covenants in commercial lease agreements, such as non-compete clauses in favour of the tenant, could not be categorized as object restraints. Arguably, the findings of the CJEU may be explained with the lack of a reliable theory of competition harm. The contested clauses had the legal effect to give rise to an exclusivity obligation in vertical agreements, which were not seen as being a serious threat to competition. Alternatively, it has been submitted that the CJEU did not share the more stringent position of the LCA because the restrictive covenants had some efficiency-enhancing objectives to the benefit of the parties as well as of consumers (see Pablo Ibanez Colomo, on the 'Chilling Competition' blog). 

That said, the ruling in Maxima Latvija that commercial lease agreements with non-compete clauses in favour of the tenants escape the categorization as by object restraints is a welcome development for retailers and property owners. Prospective lessors and lessees can then agree on similar restrictive covenants without running the risk of the lease agreements being considered as having an anticompetitive object. Notwithstanding that, however, they should bear in mind that such lease agreements may still be prohibited by Article 101 TFEU or corresponding national provisions if it is possible to establish that the agreements have negative effects on competition. To prevent this risk, retailers and property owners have to assess the competition impact of the agreements employing the criteria set out by the CJEU.

Finally, Maxima Latvija appear to be consistent with the position taken in the UK by the Office of Fair Trading, now Competition Market Authority (CMA). Also for the CMA, lease agreements containing exclusivity clauses in favour of tenants, though may have the potential to foreclose competitors of the lessee, cannot be considered to have an anti-competitive object. Therefore, in order to establish that the lease agreements in question infringe competition, an analysis of the economic effects of the agreements have to be conducted. To this end, it necessary to have regard to the scope of the relevant market, the market power of the parties and the impact of the arrangement on competition.

Barnard & Peers: chapter 17

Image credit: rus.tvnet.lv

Is Workplace Privacy Dead? Comments on the Barbulescu judgment

Steve Peers

When can an employer read an employee’s e-mails or texts, or track her use of the Internet? It’s an important question for both employers and employees. A judgment this week in Barbulescu v Romania addressed the issue, but unfortunately has been greeted by press headlines such as ‘EU court allows employers to read all employee e-mails’. This is wrong on two counts: it’s not a judgment of an EU court, but of the separate European Court of Human Rights; and the ruling does not allow employers to read all employee e-mails without limitation.

So what exactly did the judgment decide? And would the ruling have been any different if an EU court had decided it?

Background

The European Court of Human Rights (ECtHR) has jurisdiction only to interpret the European Convention on Human Rights (ECHR) and its protocols. The Barbulescu case concerns the right to privacy under Article 8 ECHR, which can be limited on certain grounds according to Article 8(2). It follows on from, and further develops, previous rulings on similar issues.

In Halford v UK, a well-known case concerning a policewoman suing her local force for sex discrimination, the ECtHR ruled that Article 8 was breached when the police force intercepted calls from a separate work telephone which they had provided for her to contact her lawyers. The key points of the judgment were that Article 8 can apply to workplaces, depending on whether there was a ‘reasonable expectation of privacy’. Ms. Halford had such an expectation since the police force had made a particular point of providing her with a separate telephone and assuring her that she could use it to discuss the litigation privately.

Obviously, situations like that are rare. It’s far more common that an employee might use a computer or phone provided by the employer in the ordinary course of work in order to have some private communication. Yet Article 8 can also protect employees in those cases too. In Copland v UK, the ECtHR ruled that Article 8 was breached when an employee’s phone calls, e-mails and Internet use from work were monitored by her boss. The crucial point was that there was ‘no warning that her calls [or e-mail or Internet use] would be liable to monitoring’.

The new judgment

How is Barbulescu different from Copland? The answer is that the facts are quite different. In the newer case, the employer had an absolute ban on employee’s use of work equipment for private reasons. Barbulescu’s boss suspected that he was not complying with this policy, and informed him of its suspicions, on the basis of monitoring his account. The employee denied non-compliance, so the employer presented him with a transcript of his Yahoo Messenger communications, which included personal communications. He sued his employer in the Romanian courts and lost, so he brought his compliant to the ECtHR.

The Court ruled that the complaint was admissible, but the majority rejected his Article 8 claim on the merits. While Article 8 was applicable, his employer was simply trying to enforce its absolute ban on private use of work equipment, and he had breached his employment contract. The employer had only accessed the account to check whether he was using it just for professional purposes, given that he had claimed that he did not use it for private reasons. The use of the transcript of his communications was limited, since the identity of the other parties to the communication was not disclosed. Other documents stored on his computer were not checked, and he did not have a convincing reason for using work equipment for private purposes.

One dissenting judge argued in detail that the majority was quite wrong on the merits, arguing for more stringent control of employers’ monitoring of employees’ private Internet use (primarily by means of detailed notification requirements). It should be noted that Mr. Barbulescu can still ask the Grand Chamber of the ECtHR to review this judgment, since it was issued by a Chamber of judges.

Impact

The Court is clearly not overturning its prior case law: it distinguishes Halford and Copland, rather than reversing them. So Barbulescu definitely does not give employers carte blanche to put their employees under surveillance. There remain – as there were before this judgment – cases where such surveillance is justified, and cases where it is not. The importance of Barbulescu is some clarification on where the dividing line falls between those two categories.

Legally speaking, that line is determined by the degree of ‘reasonable expectation of privacy’ that employees have at the workplace. They have such an expectation where the employer has expressly allowed them to use a phone or computer for private purposes (Halford), or where it was tolerated (Copland). In this case, the crucial difference is that the employer banned such use.

Moreover, the Court also mentions other specific factors, as listed above: access to the communications followed a denial by the employee; use of the transcript of the communications was limited; other documents stored on the computer were not checked; and there was no convincing reason for using work equipment for private purposes. The Court also emphasised the fact that the employee brought an employment law claim, rather than a criminal law or data protection law claim. Arguably, all of these factors are relevant and must be considered in addition to the employer’s ban on private use of work equipment.

In any event, the ruling is questionable authority, for two reasons. First of all, it’s possible that the Grand Chamber of the ECtHR will review it and overturn it. This would be richly deserved because – with the greatest respect – it’s a very poorly reasoned judgment. Secondly, it’s arguable that EU law sets higher standards. Let’s examine these two points in turn.

Comments

What are the flaws in reasoning? First of all, the majority in Barbulescu purport to distinguish the prior judgment in Copland, but in fact they contradict that previous ruling. They describe it as a case where employee use of the employer’s Internet was ‘tolerated’. That’s true, but it’s not all. As can be seen from the quote above, the crucial point of that judgment was that the employee was not told about the employer’s surveillance. That’s a crucial distinction because it’s not clear whether the employee knew about the surveillance in this case (the point was disputed between the parties, and the ECtHR decided not to address it). Of course, the point has much broader relevance: there may be many other employers in Europe which have a blanket ban on employee use of the Internet, but which have not informed their employees about surveillance. Is that failure to inform crucial (Copland), or (apparently) not (Barbulescu)? Or is it only crucial where the private use of employer equipment is not banned?

Secondly, there are internal contradictions in the reasoning. The Court places great stress on the fact that the employer only subjected the employee to surveillance when he claimed that his use of the messaging service was for work reasons only. So it had no reason to expect to find personal data in those messages, when it checked them to see if he was lying (para 57). That sounds reasonable. But in the presentation of the facts (at para 7), the accusation that the employee was using work equipment for personal reasons was based on placing him under surveillance. In other words, he was put under surveillance first. This isn’t a minor quibble, because it raises an important question of whether employers which impose a general ban on the private use of work equipment have a general prerogative to place their employees under surveillance, or whether there must be some specific reason (such as the employee’s denial of an accusation to that effect) to do so.

The Court also asserts that the identities of other people were not disclosed in the transcripts of private messages. But the judgment refers to the applicant’s brother and fiancée. Anyone who knows him knows who they are. Indeed, if Barbulescu has a social media presence, I could probably find out who they are myself – with a bit of help from Google Translate. (I haven’t actually tried this).

Finally, the Court accepts that the Article 8 right to privacy is affected, but (as the dissenting judge points out) it doesn’t properly apply Article 8(2). This means that the Court doesn’t identify what interests justify the breach of the right to privacy, whether the breach was in accordance with the law, or whether it was proportionate and necessary. While the employer interest in enforcing its policy on work equipment should fall within the scope of ‘the rights and freedoms of others’ as a justification, it’s far from clear that the employer’s actions were clear and foreseeable (part of the ‘in accordance with the law’ test) or proportionate.

EU law

As noted at the outset, the judgment was issued by the European Court of Human Rights, not an ‘EU court’. (I’ll be sending every journalist who got this wrong a batch of pork pies specially seasoned by David Cameron). But there is a substantive EU law element here, as briefly noted by the ECtHR. Data protection law is one of the two main areas where EU law and human rights law frequently overlap (the other area is asylum law).

There are several reasons to distinguish between EU law and the ECHR.  First of all, EU law applies to 28 states, while the ECHR applies to 47. This distinction is blurred a little in data protection law, since some non-EU states (Schengen associates) have agreed to apply EU data protection law; that law also applies to some companies based outside the EU (Google Spain); and non-EU countries are judged by the EU on whether their law is ‘adequate’ from the EU’s perspective, meaning it has to be quite similar to EU law (Schrems).

Secondly, the procedure and remedies are different. EU law is usually developed by means of a national court pausing its proceedings, asking the CJEU some questions and then reopening the case at national level and applying the answers it gets. It can then apply the remedies available in national law, which can sometimes be affected by EU law too (see Vidal-Hall and Benkharbouche). In this case, the Romanian courts noted the EU law points, but decided against the applicants on the merits without asking the CJEU questions. Arguably the final national court should have sent questions to the CJEU, and its failure to do so is itself an ECHR breach (see Daniel Sarmiento’s discussion here), but Mr. Barbulescu didn’t raise that point. If he had won in the ECHR, the only remedies he could get would be a declaration, costs and damages.

EU law can also be applied against private parties, subject to the limited ability to apply it in the case of Directives. That limitation will soon disappear when the upcoming data protection Regulation comes into force. The ECHR cannot apply to private parties as such, which is why this case had to be brought against the Romanian state, not Barbulescu’s employer, although the ECtHR swept aside that distinction by referring to the doctrine of positive obligations (ie the State must ensure that human rights are protected in private relationships).

The biggest issue is whether substantive EU law would give greater protection. While the ECtHR noted that this case involved Mr. Barbulescu’s ‘personal data’ within the meaning of EU law, it did not examine the EU legislation (the current data protection Directive) further. The dissenting judge did so, taking into account also ‘soft law’ of the EU’s ‘Article 29 working party’. This body of national data protection supervisors frequently meets to adopt detailed policy statements taking a very assertive view of how to interpret EU data protection law. Then they return home, and fail to enforce the policies they agreed to.

Under the EU Directive, can his employer justify collecting Barbulescu’s personal data? He did not consent to the collection of that data, so the employer would either have to argue that it was ‘necessary for the performance of a contract’, or for its ‘legitimate interests’. In the latter case, those interests could be outweighed by his rights. There’s no clear answer from this wording whether the CJEU would decide this case the same way, interpreting the Directive: it’s arguable (as the national courts held) that it was ‘necessary’ to monitor the employee’s communications in order to enforce the rule against private use of communications, or that the factors referred to by the ECtHR were enough to give precedence to the employer’s interests over the worker’s rights. But the overall pro-privacy tone of recent CJEU rulings on data protection (Digital Rights, Google Spain, Rynes, Schrems) suggest that the CJEU would be more likely to rule that some prior notification of surveillance was required.

Another issue is that some of the data concerned the employee’s health and sex life. EU law prohibits processing this, and other ‘sensitive’ personal data. But this prohibition is a legal fiction, as in fact a number of grounds for processing sensitive data are permitted. In practice, it’s more accurate to say that it’s harder to justify processing such data. Applying that rule to this case, the Directive states that such data can be processed if ‘necessary’ to carry out the employer’s obligations and rights ‘in the specific field of employment law’, if that is ‘authorized by national law providing for adequate safeguards’. It’s hard to know if these criteria were met in this case. (These rules will not change much under the future Regulation. There will be a new clause allowing Member States to have special rules for employment issues, but there’s no specific mention of employer surveillance).

Given that Romania is bound by the EU Directive, should the ECtHR have looked further at the EU law issues? It’s an awkward point, since the ECtHR doesn’t have jurisdiction as such to rule on EU law. But interferences with the right to privacy must be ‘in accordance with the law’. So there should at least have been a cursory examination of whether the national law, and the national court’s interpretation of it, appeared to be consistent with the relevant EU law. The ECtHR avoided doing this, because (very unusually for a privacy case) it ignored the ‘in accordance with the law’ test entirely.

Conclusion

Altogether, this judgment is not the ECtHR’s finest hour. But it may not be the final word on this important issue either. It remains to be seen whether the Grand Chamber might review this case, or whether the CJEU or national courts, perhaps excited by the new Regulation, might insist that higher standards apply in national law. For the time being, though, employers should be aware that there is still a fine line between acceptable and unacceptable monitoring of their employees.

Barnard & Peers: chapter 9

Photo credit: tony_anscombe_work_privacy-618x336.jpg

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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