The EU’s highest court has ruled that Irish legislation which empowers the Government to fix a minimum price for cigarettes violates European law.
In a judgment handed down today, the European Court of Justice found that Ireland breached a directive which sets down rules governing the calculation of excise duty on tobacco products.
The case dates back several years, a period in which requests by the European Commission for information from Dublin sometimes went unheeded.
In its ruling, the Luxembourg-based court said Ireland breached its legal obligations under European law by failing to provide data on the legislation to Brussels.
The case arose from proceedings that the European Commission took against Ireland, France and Austria.
The Commission argued that legislation in all three countries undermines free competition by curtailing the freedom of manufacturers and importers to determine the maximum retail selling prices of their products.
Ireland maintained that there was no prohibition on the imposition of minimum prices and argued that the system of minimum prices was justified under European law by the objective protecting health and human life.
In addition, Ireland argued that a tax increase could not guarantee “sufficiently high” tobacco prices “because that increase could be absorbed by producers or importers by sacrificing part of their profit margins, or even by selling at a loss”.
In its ruling, however, the court said legal provisions on which Ireland relied cannot be understood to authorise measures other than quantitative restrictions on imports and exports.
The directive that Ireland infringed obliges member states to impose excise duty on cigarettes including a specific element fixed by reference to cigarettes in the most popular price category which may not be less than 5 per cent or more than 55 per cent of the amount of the total tax burden.
The rate of the proportional excise duty and the amount of the specific excise duty must be the same for all cigarettes. The directive also provides that the manufacturers and importers of manufactured tobacco are to be free to determine the maximum retail selling price for each of their products.
According to the Commission, the Irish legislation was contrary to an EU directive because it imposed a minimum price for cigarettes that equated with 97 per cent of the average price of the manufactured tobacco product concerned.
The Commission’s first raised the Irish legislation with the Government when it sent a formal notice to Dublin began in October 2001.
The Commission then sent, on June 29th 2007, an additional reasoned opinion. Taking the view, in the light of Ireland’s replies to those reasoned opinions, that the situation remained unsatisfactory, the Commission brought the present action
In July 2002 the Commission sought information from Dublin on the legislation in question but found the reply did not contain the requested information.
“The Commission sent Ireland a further request for information on 1 October 2002,” the ruling said. “It was not answered.”
The Commission asked Ireland in 2003 and 2004 to comply as required by law with requests for information. In December 2004, the Department of Health and Children sent a letter in which it gave “brief details” of recent Irish legislation concerning public health and tobacco products.
A meeting took place in February 2005. In 2006, the Commission sent Ireland a reasoned opinion in which it asserted that Ireland failed to fulfil its obligations by applying minimum and maximum retail prices for cigarettes.
Ireland replied to that reasoned opinion by letter in January 2007, contending that the national legislation in question was necessary in order to protect public health.
The Commission sent a further reasoned opinion later in 2007, initiating the Court of Justice action later that year because it deemed Ireland’s replies remained unsatisfactory.
