Appeal against decision that Tied Pubs Act was within Holyrood’s legislative competence refused by Inner House

About this case:

• Citation:
  [2023] CSIH 27
• Judgment:
  External link
• Court:
  Court of Session Inner House
• Judge:
  Lord Carloway

Greene King Ltd, Hawthorn Leisure Ltd, and Punch Taverns Ltd argued that tied pub contracts were a reserved matter as they involved the regulation of anti-competitive practices, and that the Act infringed their rights under Article 1 Protocol 1 of the ECHR.

The appeal was heard by the Lord President, Lord Carloway, along with Lord Pentland and Lord Matthews. A O’Neill KC and Welsh, advocate, appeared for the first and third petitioners and reclaimers, and Crawford KC and Scullion, advocate, for the Scottish Ministers.

Erroneous focus

The Tied Pubs Act was said to be aimed at improving the relationship between tied pub tenants and their landlords by introducing a Scottish Pubs Code to govern the relationship. These were designed to ensure that Scottish tenants had at least the same protections and opportunities as were enjoyed by their counterparts in England and Wales. The Code had yet to be introduced to Parliament for approval.

It was held by the Lord Ordinary that the 2021 Act was not outside of Holyrood’s legislative competence, reasoning that the Act’s express purpose was to govern the fairness of the relationship between landlords and tenants. It did not follow from the fact that the Act interfered with parties’ freedom of contract that the Act was regulating the reserved matter of competition. The primary focus of the Act was tenant protection, and it did not address the effect on consumers nor prohibit tied pub leases.

Counsel for the petitioners submitted that the Lord Ordinary had erroneously focused on whether the changes introduced by the Act were compliant with EU competition law, when the sole question was whether the Act’s provisions related to the regulation of anti-competitive practices. The respondent had failed to substantiate any legitimate aim. No economic evidence had been produced that suggested that there was inherent unfairness in the bargaining power between landlords and tied pub tenants.

For the respondent it was submitted that the petitioners had not identified any specific provision that related to competition law. The petitioners’ interpretation of Head C3 of the table of reserved matters would prevent the Scottish Parliament from legislating in any way which may impact on tied pub agreements, no matter how remote. Parliament had been entitled to conclude that the evidence placed before it supported the general principles of the Bill.

Wide-ranging attack

Lord Carloway, delivering the opinion of the court, began by observing: “An interesting, if not unique, feature of the central issue, of whether the Tied Pubs (Scotland) Act 2021 encompasses a reserved matter in terms of heading ‘C3. Competition’ in Part II of Schedule 5 of the Scotland Act 1998, is that neither the Scottish nor the UK Parliaments nor the relative Governments appear to think that it does. From a practical point of view, it could indeed be, as the petitioners put it, an ‘easy case’ if that were determinative. However, in legal terms, it is not so simple.”

He continued: “The UK Parliament could not have intended C3. to mean that any legislation which touched (however tangentially) upon the regulation of an anti-competitive agreement, such as provisions in relation to the form in which the agreement should be expressed or its mode of execution, is “not law” because it relates to a reserved matter. Equally, specifically in relation to tied pubs, regulation of the licensing conditions, such as opening or closing times, cannot have been intended to be reserved.”

Putting the reservation into context, Lord Carloway concluded on this arm of the case: “It was accepted that tied pub leases were anti-competitive but that they were exempt from challenge on that ground. The 2021 Act does not alter that. Its purposes do not include preventing a landlord from entering into a tied pub lease with a tenant; nor do they terminate such leases. The introduction of a Code which will grant the tenant certain rights in relation to altering the lease into a market rent only one or to permit the sale of a guest beer are not per se anti-competitive measures; rather the opposite. If the Act does have some effect on such measures, it is no more than a loose or consequential connection.”

Addressing the ECHR argument, he added: “This is a root and branch challenge to the whole 2021 Act; not to a specific provision or provisions. In order to succeed in such a wide-ranging attack on the prospective effect of legislation, the petitioners require to demonstrate the Act, as a whole, cannot be operated in a manner which is consistent with the petitioners’ A1P1 rights in all or almost all cases. This is far from being demonstrated here. This ground of challenge also fails.”

The reclaiming motion was therefore refused.