Clarifying Legislative Competence: Greene King Ltd vs Lord Advocate on Reserved Matters and Property Rights

Introduction

The case of Greene King Ltd and Others vs. The Lord Advocate ([2023] CSIH 27) presents a significant judicial review of the Tied Pubs (Scotland) Act 2021. The petitioners, Greene King Limited, Hawthorn Leisure Limited, and Punch Taverns Limited, challenge the Act on two primary grounds: first, that it exceeds the legislative competence of the Scottish Parliament by regulating tied pub contracts, which are deemed a reserved matter under the Scotland Act 1998; and second, that it infringes upon their property rights as protected under Article 1 of the First Protocol to the European Convention on Human Rights (ECHR). The case was heard by the First Division, Inner House of the Scottish Court of Session, with the Court ultimately ruling against the petitioners.

Summary of the Judgment

The Scottish Court of Session upheld the legislative competence of the Scottish Parliament in enacting the Tied Pubs (Scotland) Act 2021. The petitioners' arguments that the Act pertains to reserved matters under the heading "C3. Competition" and infringes their property rights were meticulously examined and dismissed. The Court concluded that the Act's primary objective—to improve the position of tied pub tenants and ensure fair dealing—was a legitimate aim that did not overstep the boundaries set by the Scotland Act 1998 or the ECHR. Furthermore, the Court determined that any impact on competition was incidental and not sufficient to render the Act unconstitutional.

Analysis

Precedents Cited

The Judgment referenced several key precedents that influenced the Court’s decision. Notably, Imperial Tobacco v Lord Advocate (2013 SC (UKSC) 153) was pivotal in shaping the interpretation of reserved matters under the Scotland Act 1998. In this case, Lord Hope emphasized the importance of contextual interpretation over the literal meaning of reserved clauses, establishing that not all aspects of a seemingly reserved matter prohibit devolved legislation.

Additionally, the Court cited Bank Mellat v HM Treasury (No. 2) [2014] AC 700 and Christian Institute v Lord Advocate (2017 SC (UKSC) 29) to outline the proportionality test under Article 1 of the First Protocol to the ECHR. These cases provided a framework for assessing whether the interference with property rights was justified and proportionate.

Furthermore, the Judgment referenced the Small Business, Enterprise and Employment Act 2015 and its implementation in England and Wales to highlight the consistency and comparability of legislative approaches across different jurisdictions within the UK.

Legal Reasoning

The Court’s legal reasoning was anchored in interpreting the scope of reserved matters as outlined in the Scotland Act 1998. The central issue was whether the Tied Pubs (Scotland) Act 2021 fell under the reserved heading "C3. Competition." The petitioners argued that regulating tied pub contracts inherently involved anti-competitive practices, thus making the Act a reserved matter.

However, the Court adopted a purposive approach, examining the context and objectives of the reserved headings. It discerned that "Regulation of anti-competitive practices and agreements" under C3. was intended to prevent measures that directly alter or enforce competition law, such as those under the EU’s Treaty on the Functioning of the European Union (TFEU) Article 101. The Tied Pubs (Scotland) Act 2021, by aiming to ensure fair dealing between landlords and tenants rather than directly regulating competition, was found to address contractual fairness rather than anti-competitive practices.

On the ECHR grounds, the Court applied the proportionality test, evaluating whether the intervention was justified by a legitimate aim and whether it was proportionate to achieving that aim. The Court concluded that improving the position of tied pub tenants and balancing power dynamics was a legitimate objective. Moreover, the measures introduced by the Act, such as introducing a Code of Conduct and providing tenants with Market Rent Only (MRO) options, were deemed proportionate and necessary to achieve the stated objectives.

Impact

The Judgment has profound implications for the delineation of legislative competence between the Scottish Parliament and the UK Parliament. It reinforces the principle that devolved legislation aimed at improving contractual fairness does not necessarily infringe upon reserved matters unless it directly alters competition law frameworks. This decision clarifies the boundaries within which the Scottish Parliament can legislate on business practices affecting private contracts.

Additionally, the ruling sets a precedent for future challenges to Scottish legislation under the ECHR, particularly concerning property rights. It underscores the necessity for the Scottish Parliament to demonstrate that any interference with property rights is both legitimate and proportionate, thus guiding future legislative drafting and judicial reviews.

In the broader context of the pub industry, the Act represents a significant intervention aimed at rectifying perceived imbalances between large pub-owning businesses and smaller tenants. This may lead to increased scrutiny and potential legislative reforms across similar sectors where contractual fairness is in question.

Complex Concepts Simplified

Reserved Matters

Reserved matters are specific areas of legislation that the devolved administrations (like the Scottish Parliament) cannot legislate on because they are controlled by the UK Parliament. In this case, the petitioners argued that regulating tied pubs fell under reserved competition matters. However, the Court clarified that not all regulations affecting competition are reserved; only those that directly interfere with established competition law frameworks are.

Proportionality Test

The proportionality test is a legal principle used to determine whether a law that restricts certain rights is justified. It involves assessing whether the law serves a legitimate aim, is suitable to achieve that aim, does not excessively interfere with rights, and whether there are less restrictive means to achieve the same objective.

Tied Pub Contracts

Tied pub contracts are agreements where pub tenants are obliged to buy a certain proportion of their beer from the landlord or a specific supplier. These contracts have been controversial due to concerns about limiting competition and disadvantaging tenants.

Conclusion

The Judgment in Greene King Ltd and Others vs. The Lord Advocate serves as a pivotal reaffirmation of the Scottish Parliament's legislative competence concerning contractual fairness within private business arrangements. By rejecting the petitioners' claims that the Tied Pubs (Scotland) Act 2021 infringed upon reserved matters and property rights, the Court has provided clear guidance on the scope of devolved powers and the application of human rights considerations in legislative processes. This decision not only affects the tied pub sector but also sets a broader precedent for how legislative competence and property rights are balanced within the evolving landscape of Scottish and UK law.

Moving forward, stakeholders within the tied pub industry can anticipate a more regulated environment aimed at ensuring fairness and balanced power dynamics between landlords and tenants. Moreover, the clear delineation of reserved matters will aid in reducing future legal ambiguities surrounding devolved legislation.