Greene King Limited and others against the Lord Advocate
Jul 7, 2023
Tied public houses require the tenant to buy at least some of the alcohol for sale in the pub from the pub-owning business.
On 5 May 2021 the Tied Pubs (Scotland) Act 2021 received royal assent. The Act made provision for the Scottish Ministers to introduce a new code for tied pubs, while also establishing an adjudicator, with powers to investigate and enforce compliance with the code, and to adjudicate on disputes between landlords and tied-pub tenants.
Three pub-owning businesses petitioned for judicial review of the 2021 Act.
On 9 December 2022 the judge at first instance refused their petition holding that the provisions of the 2021 Act were not outside the Parliament’s legislative competence and, insofar as the Act or any of its provisions could be said to interfere with landlords' rights under Article 1 of the First Protocol to the European Convention on Human Rights, it would be premature, at least until such time as the new code was established, to carry out the necessary proportionality assessment.
The petitioners sought a review of the Lord Ordinary’s opinion.
The Petitioners submission was that this was an easy case involving two questions. First whether tied pubs agreements were anti-competitive, and the secondly did the act seek to regulate these agreements. They argued that the answer to both was yes. In their view Section 1 could not be clearer. The Scottish Ministers were “by regulations”, to “impose requirements and restrictions on pub-owning businesses in connection with tied pubs”. The Scottish Parliament was imposing a new level of regulation on what were classified under UK and EU law as anti-competitive agreements. The intention of the 2021 Act was to interfere with the current conditions of competition. It introduced a new concept of fairness.
They further argued that the judge at first instance erroneously focused on whether the changes introduced by the Act were compliant with EU competition law, which was of no consequence on whether its provision related to a reserved matter.
The Lord Advocate submitted that the petitioners had not identified any specific provision in the Act which related to the reserved matted of competition law. The challenge was to the legislation as a whole. They argued that nothing in the 2021 Act prevented landlords from continuing to enter into tied-pub agreements where the terms of the block exemption from anti-competititve laws were met. The purpose of the 2021 Act, was the regulation of unfair contract terms and improving contractual fairness between private parties.
In delivering the opinion of the court, Lord Carloway noted that an interesting if not unique feature of the central issue, of whether the 2021 Act encompasses a reserved matter in terms of heading “C3 Competition” in Part II of Schedule 5 of the Scotland Act 1998, is that neither the Scottish nor the UK Parliaments nor the relative Governments appear to think that it does.I It could indeed be, as the petitioners put it, an “easy case” if that were determinative. However, in legal terms, it is not so simple.
The petitioners’ case closely mirrored the challenge in Imperial Tobacco v Lord Advocate, which was decided in 2013. There, the Scottish Parliament had passed an Act which, in broad terms, prohibited the advertisement of tobacco products and the use of cigarette vending machines. The appellants in that case argued that these were reserved matters. Paragraph C7 (“Consumer protection”) of Schedule 5 reserved the “Regulation of – (a) the sale and supply of goods and services to consumers”.
As in the present case, this was, superficially, an attractive argument in so far as it is said to give the words their ordinary and natural meaning, if no regard were paid to their context. Taken in isolation, the words are not ambiguous; or so the argument ran.
The court agreed with Lord Hope in Imperial Tobacco. He rejected the petitioners’ approach in that case. Parliament could not have intended C3 to mean that any legislation which touched (however tangentially) upon the regulation of an anti-competitive agreement, such as provisions in relation to the form in which the agreement should be expressed or its mode of execution, was not law because it related to a reserved matter. That is the objective or intention of the wording of C3 set in its proper context. It is not designed to prevent the Scottish Parliament from introducing measures which have as their object the rectification of inequalities in the relationship between landlord and tenant in particular leases.
It was accepted that tied-pub leases were anti-competitive but that they were exempt from challenge on that ground. The 2021 Act did not alter that. Its purposes did not include preventing a landlord from entering into a tied pub lease with a tenant; nor do they terminate such leases. The introduction of a code which will grant the tenant certain rights in relation to altering the lease into a market rent only one or to permit the sale of a guest beer are not per se anti-competitive measures; rather the opposite. Therefore the challenge, in so far as it is based on reserved matter was rejected.
The court agreed with the judge at first instance that the achievement of a fair balance between the rights of the individual (in this case the landlord) and the community as a whole was something which cannot be assessed until at least the promulgation of a code and probably not until it is seen in operation in relation to a particular tied pub or lease.
The appeal by the petitioners was refused.
7 July 2023