Jonathan Griffiths, Reader in Intellectual Property Law, Queen Mary University of London

The Tobacco Products Directive (Directive 2014/40/EU, revising Directive 2001/37/EC) implements strict rules for selling tobacco products. This includes requiring larger image and text health warnings on cigarettes and rolling tobacco, tighter marketing regulations for tobacco products (including e-cigarettes), and a ban on marketing tobacco products with “characterizing flavors,” such as menthol cigarettes.

On December 23rd, Advocate General Kokott presented her Opinions on three cases regarding the validity of specific parts of the Directive. In case C-358/14 (Republic of Poland v Parliament & Council), Poland seeks to overturn the EU-wide ban on menthol cigarettes. The other two cases, C-477/14 (Pillbox 38 (UK) Ltd) and C-547/14 (Philip Morris Brands SARL), are requests for preliminary rulings from the High Court of England and Wales during judicial review proceedings. Pillbox 38 (UK) Ltd concerns implementing the Directive’s e-cigarette regulations. Philip Morris Brands SARL involves a challenge, referred to by the Advocate General as a “general onslaught,” where tobacco companies question the implementation of various Directive provisions. In all three Opinions, the Advocate General advises the Court to fully reject the challenges to the Directive’s validity.

This blog post focuses on the Opinion in Philip Morris Brands SARL. It summarizes the Advocate General’s conclusions on the questions raised by the High Court and considers the Opinion’s potential impact on current disputes surrounding the introduction of standardized packaging laws for tobacco products in certain Member States, such as the United Kingdom, Ireland, and France.

(C-547/14) Philip Morris Brands SARL

Phillip Morris and British American Tobacco (referred to as “the tobacco companies”) initiated a judicial review claim against the Secretary of State for Health to block the Directive’s implementation. They challenge the Directive on several grounds. Firstly, they argue that Article 114 doesn’t provide sufficient legal standing for several Directive provisions. Secondly, they contend that the Directive violates the principle of proportionality, especially considering the EU legislature’s obligation to respect fundamental rights under the EU Charter of Fundamental Rights. Thirdly, they argue that the Directive improperly delegates powers to the Commission, thus violating Articles 290 and 291 TFEU. Lastly, they claim the Directive violates the subsidiarity principle.

While the Secretary of State believes the Directive to be valid, he acknowledged the Court of Justice’s exclusive jurisdiction to determine its validity. As a result, the High Court submitted a series of questions to the Court of Justice for a preliminary ruling regarding the companies’ challenges.

Admissibility

Visibly frustrated by aspects of the referral, Advocate General Kokott advised the Court that she considers several of the referred questions inadmissible. Some questions pertain to the companies’ challenges against Directive provisions that allow Member States to adopt stricter national tobacco control measures than outlined in the Directive (including “standardized packaging” under Article 24(2)). Without the actual implementation of such national measures, the Advocate General deemed these questions hypothetical. [37]-[43] Furthermore, some questions concern the Commission’s delegated powers under the Directive. Since the national court proceedings focus solely on the United Kingdom’s intent and duty to implement the Directive, any questions regarding the Commission’s role are inadmissible at this stage. [44]-[47] Lastly, the national court raised concerns about the Directive’s compatibility with the subsidiarity principle. However, the nature of this alleged incompatibility wasn’t adequately explained, rendering most of these questions inadmissible except for one limited aspect. [48]-[51] Despite deeming these questions inadmissible, the Advocate General offered her views on their substance as an alternative (see below).

Even admissible questions didn’t escape scrutiny. The Advocate General expressed concern over the High Court’s limited explanation of the arguments related to the referred questions. [32]-[34] It appeared that the national court merely conveyed the tobacco companies’ challenges without forming its own opinion. By stating that the companies’ claims were “reasonably arguable,” the national court did the bare minimum to validate the remaining questions. [21]-[30]

Art 114 TFEU as legal basis for provisions of the Directive

Following established procedure, the Advocate General initially noted that utilizing Article 114 TFEU as the legal basis for Directive 2014/40 cannot be challenged simply because the Directive aims for a high level of health protection alongside improving the internal market for tobacco products. [56] She then assessed each challenge under Art 114 TFEU individually. These challenges focused on Directive provisions that: (i) ban marketing tobacco products with characterizing flavors (Art 7); (ii) regulate labeling and packaging of tobacco products (Arts 8-16); (iii) allow Member States to further standardize tobacco product packaging (Art 24(2)) and ban certain tobacco product categories based on specific national situations (Art 24(3)); (iv) give Member States the option to prohibit cross-border distance sales of tobacco products to consumers (Art 18(1)); and (v) authorize the Commission to implement certain internationally agreed standards on an ongoing basis (Arts 3(4) & 4(5)).

The Advocate General determined that with proper interpretation, Art 114 TFEU adequately supports the Union legislature’s actions in these provisions. Existing and future trade obstacles are relevant, and the contested provisions will enhance the internal market’s functionality. While the Directive prohibits certain tobacco products, thereby preventing it from improving the internal market for those specific products, existing Court jurisprudence recognizes that Article 114 TFEU empowers the Union legislature to prohibit marketing certain products if it benefits trading conditions for a broader category of products. [54]-[144]

Proportionality

During the national judicial review proceedings, the tobacco companies contested the proportionality of two aspects within the Directive: the ban on marketing tobacco products with characterizing flavors and the regulation of their labeling and packaging. Citing established jurisprudence, the Advocate General stated that the principle of proportionality:

“..requires that actions by EU institutions be suitable for achieving the legitimate objectives of the legislation in question and not exceed what’s necessary to achieve those objectives;… when choosing between several appropriate measures, the least burdensome option must be chosen, and the resulting disadvantages shouldn’t outweigh the pursued aims…” [146]

When assessing proportionality, the Court must consider fundamental rights wherever applicable.

The tobacco companies argued that many of the Directive’s contested provisions disproportionately infringe upon their freedom to conduct business (Art 16, EU Charter). Examining these claims, the Advocate General emphasized the broad discretion afforded to the Union legislature when interfering with business conduct in areas like tobacco control. This is especially true when the Union legislature aims to achieve a high level of health protection within the European internal market, particularly in areas involving political, economic, and social decisions requiring complex assessments and evaluations. In such cases, legislative action is deemed invalid only if it’s demonstrably unsuitable for achieving the intended goals, significantly exceeds what’s necessary, or leads to disadvantages clearly outweighing its objectives. [149]-[150]

Considering this and the precautionary principle [155]-[160], the Advocate General didn’t consider the contested measures a disproportionate infringement on the tobacco companies’ freedom to conduct business. The tobacco companies proposed alternative, less intrusive methods to meet the legislature’s health goals, such as imposing age restrictions on selling cigarettes with characterizing flavors and launching information campaigns about the risks of tobacco products. However, the Advocate General viewed these alternatives as less effective compared to the measures adopted under the Directive. Assessing proportionality in a strict sense, she acknowledged the potential negative economic impact of the contested provisions on certain businesses. However, she also noted the transitional periods provided by the Directive and emphasized that:

“It’s crucial to remember…that protecting human health holds significantly greater weight in the EU legal system compared to primarily economic interests (see Articles 9 TFEU, 114(3) TFEU, 168(1) TFEU, and the second sentence of Article 35 of the Charter of Fundamental Rights). Consequently, protecting health can justify even substantial negative economic impacts on certain economic operators.” [179]-[204]

Therefore, the contested provisions weren’t deemed to disproportionately infringe upon the companies’ freedom to conduct business.

The national court also raised a question regarding the proportionality of Article 13 of the Directive with the tobacco companies’ right to freedom of expression under Article 11 of the Charter. Article 13 prohibits labeling elements on tobacco product packaging that: (i) promote a tobacco product or encourage its consumption by misrepresenting its characteristics, health effects, risks, or emissions; (ii) suggest that a specific tobacco product is less harmful than others, reduces the effect of harmful smoke components, or possesses revitalizing, energetic, healing, rejuvenating, natural, organic properties, or other health or lifestyle benefits; and (iii) suggest an economic advantage. The Advocate General interpreted this provision as prohibiting both truthful and false statements on product packaging if those statements, objectively viewed, could produce one or more of the designated effects:

“An ‘organic cigarette’ remains a product highly detrimental to health. Information on the packaging shouldn’t imply – even subconsciously – to consumers aware of smoking’s health risks that smoking ‘organic cigarettes’ is desirable or environmentally beneficial. Smokers concerned about the health risks associated with tobacco consumption shouldn’t be reassured by the idea that they’re doing something positive for themselves or the planet by choosing ‘organic cigarettes’ over conventional ones.” [222]

Even with this broad interpretation, Article 13 doesn’t disproportionately infringe upon the tobacco companies’ right to freedom of expression. The Union legislature has less leeway in restricting freedom of expression compared to interfering with business conduct. The European Court of Human Rights has long subjected restrictions on commercial communications to detailed proportionality assessments, and the Court of Justice should follow suit. Nevertheless, the Advocate General believes that the constraints imposed by Article 13(1) weren’t disproportionate to the pursued health protection objectives, particularly considering the considerable health risks associated with the products in question. [211]-[237]

Improper delegation of powers to the Commission

Article 290(1) TFEU allows the Union legislature to delegate power to the Commission to adopt non-legislative acts of general application to supplement or amend a basic legislative act. Article 291 TFEU enables the legislature to delegate to the Commission the power to adopt measures implementing legislation. The referring court questioned whether the Union legislature overstepped these delegation powers when enacting Directive provisions, particularly since some delegated powers appeared legislative or unreasonably vague. The Advocate General dismissed these concerns as unfounded. [238]-[269]

The principle of subsidiarity

The principle of subsidiarity, as defined by Article 5(1) TEU in conjunction with Article 5(3) TEU, states that in areas outside its exclusive competence, the Union can act only if the proposed action’s objectives cannot be sufficiently achieved by Member States acting independently and can be better achieved at the Union level due to the scale or effects of the proposed action. [271] As previously mentioned, the Advocate General deemed most of the national court’s referred questions concerning the application of the subsidiarity principle inadmissible due to lack of detail. The sole admissible question regarding subsidiarity was swiftly dismissed by the Advocate General, who firmly believed that controlling tobacco products with characterizing flavors couldn’t be effectively achieved at the national level and that the Directive’s objectives in this area were better addressed at the Union level.

Besides this substantive challenge, the national court questioned whether the Union legislature provided sufficient justification for the Directive in light of the subsidiarity principle, suggesting that the legislature merely asserted compliance with the principle in a formulaic manner. This raised concerns about whether the Directive suffered from a flawed statement of reasons. Addressing this, the Advocate General noted:

“When examining compliance with the subsidiarity principle, the EU measure’s statement of reasons must clearly demonstrate whether the Union legislature adequately considered questions relevant to the principle of subsidiarity and, if so, its conclusions regarding subsidiarity.”

She acknowledged that Recital 60 of the Directive was a “meaningless phrase.” However, this didn’t necessarily invalidate the measure since relevant aspects concerning subsidiarity were present in other recitals, even without explicitly mentioning the principle. Additionally, the justification for a Union measure against the proportionality principle didn’t need to be fully evident within the contested legislative measure itself. In this instance, the justification for the Union’s legislative action could be found in the Explanatory Memorandum for the Commission’s Proposal for a Directive and the extensive preparatory work done by the Commission staff during the impact assessment for the Directive. Therefore, the legislative institutions had sufficient grounds to evaluate compliance with the subsidiarity principle. [270]-[301] Nonetheless, the Advocate General suggested:

“…it’s strongly recommended that in the future, the Union legislature avoids formulaic language like that found in Recital 60 of the Directive’s preamble and instead strengthens the preamble of the relevant EU measure with substantial, tailored statements regarding the subsidiarity principle for each specific measure.” [301]

Implications for standard packaging legislation in the Member States

If the Court follows Advocate General Kokott’s recommendations, the most contentious provisions within the Tobacco Products Directive will effectively withstand the tobacco industry’s “general onslaught.” However, this won’t be the end of the industry’s legal challenges against tobacco control legislation in Europe. As previously mentioned, Article 24(2) of the Directive states:

“This Directive doesn’t affect a Member State’s right to maintain or introduce stricter requirements applicable to all products marketed within its territory concerning the standardization of tobacco product packaging when justified on public health grounds, considering the high level of human health protection achieved through this Directive. Such measures shall be proportionate and must not constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States…”

Both the United Kingdom and Ireland have already exercised this freedom to enact comprehensive standardized packaging legislation (see the Standardized Packaging of Tobacco Products Regulations 2015 and the Public Health (Standardised Packaging of Tobacco) Act 2015, respectively). France has also committed to following suit.

These laws mandate that tobacco products be sold in plain packaging devoid of branding elements except for the brand name and product variant. Although the UK and Irish provisions are scheduled to take effect in May, the tobacco industry has already challenged them through judicial review proceedings. The UK High Court heard the industry’s challenge in December, with a judgment expected soon. The industry argues, among other things, that the domestic legislation violates the principle of free movement of goods, infringes upon European trademark law, and violates several of their fundamental rights.

Case C-547/14 (Philip Morris Brands SARL) doesn’t directly address Member State standardized packaging legislation. As discussed, the national court’s questions regarding the validity of Article 24(2) were deemed inadmissible due to being hypothetical. However, if the Court adopts the Advocate General’s views, it could significantly impact the outcome of domestic challenges against the legality of the UK and Irish legislation.

National court not simply to refer tobacco companies’ challenges without attempting to reach its own view

The tobacco industry possesses significant financial resources and fights against tobacco control measures using all available means. In the domestic proceedings for C-547/14 (Philip Morris Brands SARL), the industry clearly employed every tactic at its disposal to challenge the Directive. Given this, it’s unsurprising that the domestic judge seemed content with simply determining the arguability of the claims before passing them on to the Court of Justice. Nonetheless, the Advocate General’s pointed criticism increases the likelihood that the High Court judge currently presiding over the challenge to the UK’s standardized packaging regulations will strive to address the industry’s numerous claims directly instead of simply deferring them to the Court.

Free movement of goods

In C-547/14 (Philip Morris Brands SARL), the tobacco companies argued that Article 24(2) lacked proper legal grounding under Article 114 TFEU because it allows Member States to hinder the free movement of goods by implementing stricter rules than those established at the Union level. As previously mentioned, the national court’s question on this matter was deemed inadmissible. However, the Advocate General suggested that Article 114 TFEU could serve as a suitable legal basis for Article 24(2). When interpreted correctly, this provision only permits Member States to adopt “further requirements” in areas where the Union legislature hasn’t implemented harmonization. Therefore, Article 24(2) merely clarifies that the Directive provides only partial harmonization. [105]-[120] Based on this, the Advocate General indicated that it should be possible for Member States to introduce fully standardized packaging legislation at the national level:

“[…][T]he Member States retain the freedom, in particular, to set their own requirements regarding the colors used for all parts of the packaging not designated for warnings, extending to the standardization of packaging…. Coloring is regulated – indirectly – in the Directive at most insofar as Article 13 prohibits presenting tobacco products in a misleading or deceptively positive manner.” [113]

It’s important to note that such national legislation would introduce new barriers to trade, making the proportionality principle crucial for determining whether the resulting interference with the free movement of goods is justifiable. The Advocate General’s Opinion also offers valuable insight on this aspect.

Proportionality and fundamental rights

Technically, the proportionality of national legislation must undergo stricter scrutiny than the general standard applied by the Advocate General in C-547/14 (Philip Morris Brands SARL) (“manifest disproportionality”). Differences also exist in the factual and policy contexts of both disputes. However, the Opinion contains several indications suggesting that, in principle, national standardized packaging legislation would likely withstand scrutiny for compliance with the proportionality principle under Union law.

Logically, a Member State legislature should also have discretion when legislating in areas like tobacco control, which involve political, economic, and social choices requiring complex assessments and evaluations. Furthermore, the “precautionary principle” should apply when national legislation aims to achieve crucial public health objectives, especially when scientific evidence is, to some extent, inconclusive. More specifically, the Advocate General’s Opinion expresses significant skepticism towards several arguments heavily relied upon by the industry in their judicial review of the standardized packaging regulations within the United Kingdom.

The Advocate General seemed unconvinced by claims that standardized packaging legislation is disproportionate due to potentially increasing counterfeit tobacco trade. [84]-[85]; [182] Perhaps more significantly, she refuted, with a hint of disdain, the argument that standardized packaging legislation would be ineffective in deterring people (especially youth) from smoking. She noted that plainer packaging removes some of the “coolness or fun factor often associated with unique or visually appealing packaging, as well as the inherent curiosity sparked by novel packaging…” [191]

Conclusion – the role of fundamental rights

The tobacco industry has heavily emphasized its fundamental rights while lobbying against and litigating standardized packaging legislation. However, the Opinion in C-547/14 (Philip Morris Brands SARL) suggests that framing its arguments within the Charter’s framework likely won’t decisively impact the outcome of its challenge against standardized packaging legislation. The right to conduct business is easily superseded by public interest concerns. Even if restricting the industry’s right to utilize its trademarks is presented as interference with property under Article 17 of the Charter, it wouldn’t appear to significantly alter the proportionality assessment in this specific case (see C-477/14 Pillbox 38 (UK) Ltd [194]-[201]). Even arguments based on the more potent right to freedom of expression are unlikely to succeed. Ultimately (and perhaps unsurprisingly), all such claims encounter the same obstacle. In the Advocate General’s own words:

“Undoubtedly, the standardization of cigarette pack shapes, sizes, and minimum content brought about by the Directive limits the diversity, marketing opportunities, and competitive potential for tobacco product manufacturers. However, the purely economic interest in maximizing inter-product and inter-brand competition must take a backseat to protecting human health, which, as previously stated, holds a significantly higher value within the EU legal framework…” [193]-[204].

However, this isn’t the only noteworthy point regarding the Union’s framework for fundamental rights. More broadly, certain aspects of the Opinion suggest that the Court’s jurisprudence on applying the Charter might still be evolving. Firstly, while the Advocate General acknowledged the right to healthcare protected under Article 35 of the Charter as a vital public interest, she didn’t assess the legitimacy of the various contested provisions by considering the need to strike a “fair balance” between competing rights of equal weight. Instead, she focused solely on determining the proportionality of the Union legislature’s interference with the tobacco companies’ protected rights. This approach could be attributed to how the national court presented its questions. However, the Court has employed a “fair balance” framework in other cases. This inconsistency reveals a notable ambiguity within its jurisprudence on fundamental rights.

Another interesting aspect of the Opinion relates to the concept of the “essence” of protected fundamental rights. Article 52(1) states:

Any limitation on exercising the rights and freedoms recognized by this Charter must… respect the essence of those rights and freedoms.

Here, “essence” seems to indicate a minimum level of protection that cannot be breached. However, the Court hasn’t yet provided a clear explanation of this concept’s precise function. This ambiguity is evident in the Opinion. After thoroughly assessing the proportionality of the Directive’s interference with the right to freedom of expression, the Advocate General offers only this brief afterthought:

“The essence of freedom of expression (first sentence of Article 52(1) of the Charter of Fundamental Rights) is similarly unaffected if an EU legislative act restricts commercial communications by undertakings solely intended for promotional purposes.” [236]

This lack of further clarification seemingly highlights another aspect of the Court’s jurisprudence on fundamental rights awaiting further development.

Barnard & Peers: chapter 5, chapter 11, chapter 12

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