Law Report: 29 January 1998: Increase in beer duty did not breach EC treaty

The increase of 3 per cent in the excise duty on the price of beer imposed by the Government in 1997 did not amount to a breach of the EC Treaty.

Regina v HM Treasury and others, ex parte Shepherd Neame Ltd; Queen's Bench Divisional Court (Lord Justice May and Mr Justice Moses) 21 January 1998

The court refused the application of Shepherd Neame Ltd for judicial review of the Budget announcement on 2 July 1997 of an increase of 3 per cent (which was the amount of inflation) in excise duty on the price of beer, and of section 8 of the Finance (No 2) Act 1997, amending section 36 of Alcohol Liquor Duties Act 1979, which brought it into effect.

The applicant, a well-known brewing company, contended that the high rate of excise duty in the United Kingdom compared to other member states of the European Union had damaged its trade. It asserted that cross-border shopping and smuggling had caused loss of revenue from its trade which was, substantially, in close proximity to cross-channel rail and ferry services. It sought to impugn the Budget announcement and the statutory provision on the ground that they were incompatible with the EC Treaty.

Michael Beloff QC and Clive Lewis (Travers Smith Braithwaite) for the applicant; Lord Falconer of Thuroton QC and David Anderson (Solicitor, HM Customs and Excise) for the respondents.

Mr Justice Moses said that the applicant alleged that the United Kingdom's increase in excise duty on beer was in breach first of a substantive obligation, and secondly of a procedural obligation imposed by the EC Treaty.

At the heart of the substantive objection lay the submission that an increase in excise duty was a breach of the legal obligation under Article 5, in combination with other Articles or by itself, to abstain from action which could jeopardise the attainment of the objectives of the Treaty. The objective identified by the applicant was such further harmonisation of excise duties as was necessary to achieve the proper functioning of the internal market.

The only legal obligation on member states was, however, to comply with the minimum rates of excise duty set by the Rates Directive (EEC) 92/84. There was no legal obligation to abstain from measures which preserved or increased divergence in excise duty rates. Setting rates for excise duty was a matter which was within the sole competence of member states. The court was in no position to place the rate imposed in respect of beer in the context of other sources of revenue, and neither could nor should make any judgment whatever as to how the Government should exercise its fiscal freedom.

Even if the applicant's arguments had established a legal obligation, it would still have been necessary to show a breach. The rise of 3 per cent had been no more than was necessary to keep pace with inflation, and it was not possible to see how a rise which preserved but did not increase divergence could be said to amount to such a breach.

The second ground of challenge asserted a breach of a procedural obligation to consult the Commission before taking action which there was reason to believe might cause distortion of the conditions of competition, contrary to Article 102(1) of the Treaty. The obligation to consult the Commission only arose where there was reason to fear that the adoption or amendment of a provision laid down by law, regulation or administrative action might cause distortion of the conditions of competition in the common market within the meaning of Article 101. As had already been said, a rise by the amount of inflation caused no distortion by itself, and so the increase in duty in 1997 had not triggered an obligation to consult.

Had there been such an obligation, however, it would not have been fulfilled by a letter of notification from the Government, informing the Commission of its intention to raise excise duty on beer and inviting questions. Consultation required a process whereby all involved in consultation sought jointly to reach a conclusion, not the mere notification of a conclusion.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk