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  4. Tied Pubs Act within Holyrood competence: Inner House

Tied Pubs Act within Holyrood competence: Inner House

10th July 2023 | government-administration , commercial property | Competition

The Tied Pubs (Scotland) Act 2021 is within the legislative competence of the Scottish Parliament, and does not fall within the reserved matter of the regulation of anti-competitive practices or agreements, nor does it infringe landlords’ property rights under article 1 of Protocol 1 to the European Convention on Human Rights (“A1P1”), the Inner House of the Court of Session has held.

Lord President Carloway, Lord Pentland and Lord Matthews gave the ruling in refusing an appeal by Greene King Ltd and two other companies against the decision of the Lord Ordinary, Lord Harrower, who refused their petition for judicial review of the Act.

The object of the Act, which began as a member’s bill, was to improve tenants’ rights to achieve a fairer balance between tenants and landlords, and at least the level of protection for tenants as enjoyed by those in England & Wales following legislation in 2015. It provided for a code to be based on the principles of fair and lawful dealings by landlords; that the tenant should not be worse off than if they were not subject to the tie; and that the tie offered a fair share of risk and reward.

The petitioners founded on a consultant’s report which emphasised the benefits from tied pub arrangements, criticised the evidential basis for complaints by tenants and opined that there were no proper reasons for state intervention.

It was argued that tied pub agreements were clearly anti-competitive, and it was also clear that the Act sought to regulate these agreements. Pre-Brexit, tied pubs had been subject to a block exemption under EU competition law; the substance of the law remained largely unchanged. It was accepted that the Act would have some impact on competition; it was irrelevant that these effects were incidental to the Act’s purpose.

Their A1P1 rights were also engaged; the respondents had failed to substantiate any legitimate aim on the basis of which a proportionality assessment could be carried out.

Delivering the opinion of the court, Lord President Carloway observed first that neither the Scottish nor UK Parliaments or Governments appeared to think that the reserved matter of competition law was engaged. The intention of the reservation had to be ascertained from its context. The case was similar to Imperial Tobacco (2013) on the prohibition of tobacco advertising, which superficially concerned the reserved matter of consumer protection but was held in fact to concern the private law of sale and supply of goods. The wider context here was that of defining matters that had pan-UK effect and were thus more appropriately regulated on a UK basis.

“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”, Lord Carloway said of the reservation. “It is to stop the Parliament from legislating in a manner which will affect UK anti-competitive measures.” The separate introduction of measures in England & Wales had not been regarded as distorting the competition regime.

Regarding A1P1, the objective of the Act was a legitimate one: the improvement of the position of tied pub tenants. There was material before the Parliament to demonstrate an imbalance in bargaining position, and an objective designed to cure that was legitimate. The achievement of fair balance could not be assessed until the code was promulgated, and probably not until it was seen in operation. In challenging the whole Act, the petitioners required to demonstrate that it could not be operated in a manner consistent with their A1P1 rights, and “This is far from being demonstrated here.”

The court further observed that it was not the practice, had the petition succeeded, for it then to remit the matter to the Lord Ordinary for assessment of damages by way of just satisfaction: all relevant issues ought to have been dealt with before the case reached the Inner House. There were no pleadings to form the basis of an award of damages.

Also, parties’ notes of argument had failed to comply with the practice direction limiting the number of authorities cited except with leave of the court.

Read the opinion of the court.

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