Challenge to legitimacy of tobacco directive

A case involving a challenge on EU Directive 98/43 was the subject of a recent opinion by Advocate-General Fennelly of the European Court of Justice. It is expected that the Court will issue its judgment in the next few months.

The case, which involves a challenge on EU legislation making rules outlawing tobacco advertising and sponsorship, also raises important European constitutional questions in relation to the scope of the powers of EU legislative bodies. Although this case is specific to the tobacco industry, it will undoubtedly have a wider effect, particularly on attempts by the EU to enact measures which are binding on Member States where the principal aim of the act in question is not one which is clearly permitted under the Treaties.

The Directive

The Directive brought forward a wide-ranging prohibition on most forms of tobacco advertising and sponsorship, including direct marketing to customers and sponsorship of sporting and other events. The ban was to be implemented nationally over a period of time extending from July 2001 to July 2006. The prohibition on advertising also covered the use of tobacco trade marks on otherwise non-tobacco products. This led to action by Salamander, the company responsible for marketing Camel boots and by Davidoff which makes perfumes under that name.

The issues

The Directive was enacted under article 95 (ex article 100A) of the Treaty which is designed to be the framework for measures to harmonise national laws with a view to completing the internal market and preventing distortion of competition. Article 1 of the Directive states that its objective was to “approximate the law, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products”. The first recital narrated that the pre-existing differences between national rules in this field were likely to give rise to barriers not just to the provision of services as regards the advertising and sponsorship of tobacco products but also to the movement between Member States of products which serve as the media for such advertising and sponsorship. These differences also had the effect of distorting competition. This provided the stated rationale of the Directive.

Tobacco companies, the German state and other companies which market products using tobacco-related names argued, however, that the main aim of the Directive was in fact in relation to public health and that the internal market principles invoked were merely a smoke screen. It was pointed out that public health is an area where the Union does not have power to take measures which are binding on the Member States (public health matters are dealt with at article 152 (ex article 129) of the Treaty). The legal basis of the Directive was thus faulty and the Directive should be annulled.

The challenges

The first challenge to the Directive was taken directly to the ECJ by Germany under article 230 (ex article 173) of the Treaty. Davidoff and Salamander chose to bring their challenge in the Court of First Instance arguing that they were sufficiently directly and individually concerned by the provisions of the Directive to allow a valid challenge by them to the directive. This approach was later deemed by the CFI to be invalid as the Treaty makes no provision for individuals to take direct action before the Community judicature challenging a Directive.

Other tobacco companies decided, instead, to raise an action for judicial review in the English High Court. As, at that point, no implementing legislation had been brought forward in the UK, the challenge was to the intention of the government to implement the Directive in terms of its obligations under the Treaty. This unusual approach was successful and the Court thereafter agreed to refer the question of the validity of the Directive to the European Court of Justice under article 234 (ex article 177) of the Treaty.

The opinion

Following a hearing earlier this year on the conjoined cases of the tobacco companies and Germany, Advocate-General Fennelly gave his opinion on the case to the Court. In a lengthy document, the Advocate-General considered the Directive not only in the context of its effect on the internal market but also in relation to freedom of expression, proportionality, breach of economic rights and subsidiarity. He considered, however, that the central issue in the case was whether the internal market constitutes a sustainable legal basis for the Directive. If that were the case, the fact that the Directive simultaneously had the effect of protecting public health would not affect its validity. However, his examination of the Directive led him to conclude that its sole effect was to prohibit trade in the goods and services to which it relates, and thus it could not be argued to be removing internal market barriers. The Advocate-General’s main finding was that the Directive’s legal basis was incompetent and his principal recommendation was that it should be annulled in its entirety.

The effects

It is expected that the ECJ will make its ruling in this case before the end of the year. Although the Advocate-General’s opinion is in no way binding on the Court, in the past such opinions have proved to be very persuasive and, indeed, are followed in the vast majority of cases.

Even at this point, however, the case would appear to have important constitutional implications in relation to the powers of the Union to legislate in areas which are not clearly identified in the Treaties such as public health. Internal market measures can, by their very nature, be very wide-ranging in application, and very often form at least part of the legal basis of many EU legal instruments. The Advocate-General in this case was careful to separate those measures which he felt could legitimately be taken affecting tobacco products in promotion of the internal market and against the distortion of competition in the free market from those which were, in his opinion, illegitimate. However, if the Court follows the Advocate-General’s recommendations it would be clear that the legislative bodies of the EU which wished to use internal market measures under article 95 would not be permitted to do so to promote what would otherwise be non-binding recommendations to the Member States unless their principal aim was demonstrably to further the cause of the single market.

In addition, in terms of the domestic English courts, this case has established the possibility of courts accepting jurisdiction in a case where there is no actual domestic legislation but where there is an obligation under the Treaty to enact such legislation.

Electronic commerce

Commission published communication on “.eu” domain name
As a follow up to the public consultation carried out earlier this year on the feasibility of creating a “.eu” domain name, the European Commission has now published a Communication (http://europa.eu.int/eurlex/en/com/pdf/2000/com2000_0421en01.pdf) outlining the procedure for the implementation of such a domain name. In the Communication, the Commission considers that the creation of a “.eu” domain name would encourage e-commerce in Europe by providing a specific European identification which would be recognised globally. The Commission suggests that a non-profit organisation should oversee the registration and intends to contact ICANN (Internet Corporation for Assigned Names and Numbers) regarding the action required for the designation of the “.eu” domain name. The Commission intends to continue consultations with interested parties from the private and public sector in order to enable it to draw up a suitable legal framework for the operation of the system, as well as accompanying registration guidelines. Once completed, the Commission’s conclusions will be sent to the European Parliament and the Council in a separate Communication.

Intellectual and Industrial Property

EU-wide patent on the way to becoming a reality
A single European Community Patent is one step nearer following the Commission’s announcement in July of its proposal for a Regulation in this area. The prime motivation behind the proposal is to reduce the translation costs involved in patent coverage. The European Patent Office (EPO) currently grants European patents in a single application, by-passing the need to file with several national patent offices. This procedure however does not avoid the burden of translation costs, as a Member State may still require translation into their language in order for the patent to be recognised. The Commission’s proposal is that a patent would be published in one of the EPO’s working languages (English, French or German) while the section of the patent which outlines the scope of protection would be translated into the other two languages. Such a proposal may prove controversial in Member States which do not use one of the three languages. The European Commission had already made proposals in its submission to the Inter-Governmental Conference for a new, centralised Community tribunal under the European Court of Justice, to deal with disputes regarding patent infringement and the validity of Community patents.

Employment law

New anti-discrimination powers put to practical use
Article 13 of the Amsterdam Treaty, allowing for new powers to combat discrimination, has paved the way for an anti-racism Directive which was recently adopted by the Council. The speed at which this piece of legislation has developed (just over three months) has demonstrated the general political consensus surrounding the issue. The Directive is geared towards establishing common, comprehensible definitions of discrimination, e.g. laying down the definition of direct and indirect discrimination. Social security, employment, healthcare, education and access to goods and services are all covered by the Directive and the aim is to ensure uniformity throughout the Member States with respect to minimum rights of redress. Under this new Directive, the burden of proof will be borne by the defender when a court has accepted that a prima facie case of discrimination exists. Member States will have three years in which to implement the Directive.