Case E-19/11: EFTA-Court finds no smoking gun in caffeinated alcoholic drinks case

With our eyes glued on the Court of Justice, it is sometimes easy to overlook the work of its less-famous cousin, the EFTA Court, also situated in Luxembourg, just a stone’s throw away from the CJEU. Today, our attention turns to the judges of the European Economic Area, after they delivered an interesting case on the free movement of goods this morning.

 Just to remind those who are not so familiar with the setting, the European Free Trade Area Court is a separate international court set up to ensure the independent interpretation of the law of the European Economic Area (EEA). The EEA was set up to create a very close association of the European Free Trade Area (EFTA) countries with the EU, integrating them to quite some degree into the internal market. Today, the remaining EFTA states in the EEA are Norway, Iceland and Liechtenstein. The EFTA-Court’s role is quite similar to that of the CJEU and it is required, to a degree, to adopt a homogenous interpretation of EEA rules whenever they are similar to EU law norms. There remains, however, a clear institutional divide between EU and EEA law:  the CJEU held, in its first Opinion on the establishment of the  EEA Agreement, that a separation must be maintained between the two regimes so as to safeguard the autonomy of the EU legal order.

After this primer in EEA law, we turn now to today’s free movement of goods decision that came down today. In this case, a trader sought to show that the Icelandic alcohol monopoly, ÁTVR, had acted in violation of EEA rules by refusing the sale of alcoholic beverages containing stimulants such as caffeine in its outlets. ÁTVR had based its refusal on Iceland’s public health policy, which again was based on studies showing that such drinks could lead to a higher degree of intoxication by making consumers less aware of being intoxicated, with subsequently increased risks of serious consequences.

Having first clarified (paras 36 and 38) that Article 16 EEA on commercial monopolies (the equivalent of Article 37 TFEU) , rather than Article 11 EEA (the equivalent of Article 34 TFEU), was applicable, the Court then had to decide whether ÁTVR’s actions could be considered as discriminating against foreign producers or importers. The EFTA Surveillance Authority (equivalent of the Commission) argued that, since there was no production of alcoholic beverages containing caffeine in Iceland, ÁTVR’s refusal constituted in practice an obstacle for imported products only. This had the effect of conferring an advantage on domestic products that found themselves in a competitive relationship with such beverages, such as alcoholic beverages containing stimulants other than caffeine or soft drinks containing caffeine which are usually mixed with alcohol (para 47).

The EFTA-Court did not accept these arguments. It underlined that Article 16 EEA served the purpose of allowing EEA Member States to pursue public interest aims through the maintenance of commercial monopolies, so long as operators and traders from other EEA States were not put at a disadvantage in law or fact through the operation of such monopolies (paras 51-52). It stated briefly that it was ‘not contested’ that the fight against alcohol abuse and the protection of public health against the harm caused by such abuse could be pursued as a public interest objective, justifying the operation of a monopoly (para 54).

Looking at the regulatory context of ÁTVR’s decision, the Court found the pertinent rules to ‘appear to be based on objective criteria independent of the origin of the products’ (para 57). The lack of domestic production of such beverages could not in itself entail that a measure was discriminatory (para 58 with references to EEA and EU case law).

Discrimination would only arise if the measure served to protect domestic products similar to the products covered by a contested measure or in competition with them (para 60). Focusing on consumer needs for the purpose of determining whether there were indeed products in competition with the caffeine-spiked alcoholic beverages (para 62), the EFTA-Court then held that beer and alcopops without stimulants catered to a different audience. Consumers drinking alcoholic beverages with caffeine were ‘seeking an additional effect’ and thus constituted a different target group (para 63). Also, soft drinks containing caffeine targeted a different group according to the EFTA-Court and could in particular not be considered to be in competition with alcoholic beverages in countries where the retail of alcoholic beverages was subject to a state monopoly (para 64). Since there were thus no domestic beverages in competition with the imported contested alcoholic beverages, there could be no disadvantageous treatment and thus no violation of Article 16 EEA (para 65).

The decision appears in principle convincing, although some national treatment experts might find the EFTA-Court’s reasoning on consumer needs a bit terse. On the other hand, I am not sure whether a wave of attrition warfare by the parties with comprehensive empirical studies of consumer behaviour would have produced a truly different result.

As a perhaps more weighty point of critique, the EFTA-Court’s way of deciding the case based fully on issues of discrimination leaves the central point of the Icelandic rules – the public purpose they are aimed at – aside, apart from the short reference mentioned earlier (para 54). It would have been interesting to see the EFTA-Court engage in some more detail with the public policy objective of reducing health and other risks connected to alcohol consumption and the proportionality of the measure at issue. Not that this would have changed the outcome; in fact, my point is that Iceland’s alcohol policy could have come away from the litigation strengthened by an approval of the EFTA-Court (which would quite likely have happened, as the policy seems to be based on rather sound studies). With the decision as it is, the EFTA-Court seems to have simply found no ‘smoking gun’ of protectionism. Nothing more, nothing less.