Pfizer wins customs duty challenge in the Court of Justice of the EU – Valentina Sloane QC represented Pfizer

The Court of Justice of the EU has found in favour of Pfizer in its action for annulment of a European customs classification regulation.

Pfizer imports into the United Kingdom products falling under the registered trade mark ThermaCare. The products are presented and marketed for the purposes of heat therapy, to deliver benefits such as analgesia, reduced stiffness and acceleration of healing to damaged tissue.

The European Commission issued a classification regulation which had the effect of classifying Pfizer’s ThermaCare range of therapeutic heat products as “chemical products and preparations” and rejecting their classification as “wadding, gauze, bandages and similar articles..for medical purposes”. HMRC issued a Binding Tariff Information in accordance with the regulation.

Pfizer appealed to the First-tier Tribunal against HMRC’s classification decision and applied for a reference to the CJEU on the ground that the European Commission classification regulation was invalid.
HMRC contested the application and argued that the relevant test was whether the Commission had made a manifest error. The First-tier Tribunal rejected that argument and allowed Pfizer’s application, with an interesting and useful analysis of the appropriate threshold for making a reference in challenges to the validity of EU legislation.

The Court of Justice of the EU has now ruled that the European Commission exceeded its powers and the commission regulation is invalid. Its judgment contains helpful principles on the concept of “medical purposes”, which is not defined in the Combined Nomenclature or the explanatory notes.

Valentina Sloane QC represented Pfizer and was instructed by Hogan Lovells.

A copy of the national court’s judgment on Pfizer’s application for a preliminary ruling is here.

A copy of the judgment of the Court of Justice of the EU is here.

Supreme Court finds government cooperation with US death penalty proceedings unlawful under data protection law

Elgizouli v Secretary of State for the Home Department [2020] UKSC 10

The Supreme Court has today handed down judgment in a “leapfrog” appeal from the Divisional Court concerning a decision by the Government to provide mutual legal assistance to the United States to facilitate the prosecution of offences carrying the death penalty, without seeking assurances that the death penalty would not be imposed. The Supreme Court’s judgment is significant, in particular, in the field of data protection law.

The questions that were certified by the Divisional Court were:

(i) Whether it is unlawful for the Secretary of State to exercise his power to provide mutual legal assistance so as to provide      evidence to a foreign state that will facilitate the imposition of the death penalty in that state on the individual in respect of whom the evidence is sought; and

(ii) Whether (and if so in what circumstances) it is lawful under Part 3 of the Data Protection Act 2018, as interpreted in light of relevant provisions of EU data protection law, for law enforcement authorities in the UK to transfer personal data to law enforcement authorities abroad for use in capital criminal proceedings.

On the first question, the majority (Lord Carnwath and Lord Reed, with whom Lady Black, Lord Lloyd-Jones, and Lord Hodge agreed) concludes, in agreement with the Divisional Court, that the common law does not recognise a right to life that prevents the Secretary of State from providing mutual legal assistance to, or sharing intelligence with, a foreign country where that might lead to a risk of the death penalty. Lord Kerr, in a powerful dissenting judgment, concludes that it is unlawful at common law for the state to facilitate the execution of the death penalty against its citizens or others within its jurisdiction anywhere in the world.

The Supreme Court is, however, unanimous in holding that the Secretary of State’s decision was unlawful under the Data Protection Act 2018. Much of the information provided, or to be provided, to the US authorities consisted of personal data, and the Court concludes that the processing of such data by the Secretary of State required a “conscious, contemporaneous consideration” of the relevant criteria under the 2018 Act. “Substantial compliance” with those criteria, as found by the Divisional Court, was not enough. (It was not in dispute that the Secretary of State, when making the decision in question, did not address his mind to the 2018 Act at all.) The judgment notes that the Supreme Court was assisted on the data protection points by a helpful intervention from the Information Commissioner, which had not been available to the Divisional Court.

The judgment is significant, in particular, for the analysis of Part 3 of the 2018 Act (Law Enforcement Processing), the test of necessity under that Act, and the rules on transfers of personal data to third countries. The analysis of Lord Kerr and Lord Reed on how the common law develops, and the state of UK and international law on the death penalty, is also required reading.

The judgment and Supreme Court press summary is available here.

Julianne Kerr Morrison acted for the Appellant. Gerry Facenna QC and Conor McCarthy acted for the Information Commissioner.

Court of Appeal rules that Avastin may be used to treat eye disease, but only on conditions

The Court of Appeal today handed down judgment in the appeal by Bayer and Novartis against a High Court decision that upheld a policy of various NHS Commissioning Groups (CCGs) of recommending that NHS prescribers use Avastin to treat a common and serious eye disease known as wet AMD. The marketing authorisation (MA) for Avastin, which is held by Roche, does not cover its use to treat wet AMD, though NICE has accepted that it is a cost-effective treatment. Bayer and Novartis supply drugs that do have an MA covering treatment of wet AMD, but those drugs are much more expensive than Avastin.

The High Court had held that the CCGs’ policy was lawful. The Court of Appeal agreed, but accepted submissions from the Secretary of State for Health and Social Care, who is responsible both for the NHS and for the MHRA (the UK body responsible for medicines licensing), that the High Court had been wrong to hold that Avastin, in a form repackaged for use to treat wet AMD, could be supplied without an individual prior prescription system being in place: the Court of Appeal expressly adopted the Secretary of State’s argument that the High Court’s conclusion could weaken the licensing system. However, the Court of Appeal also agreed with the Secretary of State that NHS Trusts could, subject to that condition, lawfully use Avastin to treat wet AMD, and dismissed the pharmaceutical companies’ appeal.

The judgment has been eagerly awaited by the NHS and by pharmaceutical companies. Avastin has been the subject of litigation across Europe, with several cases having reached the Court of Justice of the EU: and the Court of Appeal’s judgment is likely to be carefully read across the EU.

George Peretz QC acted for the Secretary of State.

Unfair Contract Terms Directive in financial services – Anneli Howard acts for UK Government in preliminary reference on transparency and fairness requirements and remedies in Spanish mortgages disputes

Case C-125/18, “Marc Gomez del Moral Guasch vs. Bankia SA

Earlier this month, the Grand Chamber of the European Court of Justice (ECJ) ruled on the legal test for assessing the transparency and fairness requirements for mortgage interest rates under the Unfair Terms in Consumer Contracts Directive 93/13 (UCTD).

Case C-125/18, “Marc Gomez del Moral Guasch vs. Bankia SA” concerned a multi-question request from the Barcelona court to the ECJ for guidance on what information must be provided to a consumer at the time of entering into a variable interest rate (in the context of a long term mortgage agreement) in order to meet the plain and intelligible language test. The reference involved a test case, following multiple litigation proceedings challenging variable rates based on the official Spanish average “IRPH” rate which is much higher than the Euribor rate. In Spain, over 1 million borrowers have IRPH loans totalling over 15.5 bn euros.

Application of UCTD

In response to the three questions referred to the ECJ by Spanish courts about an allegedly unfair mortgage deal, the ECJ found variable mortgage rates, which are not mandated by law, fall within the scope of the UCTD. Even if the UCTD had not been fully implemented into domestic law, EU consumer law requires Member States to ensure mechanisms by which national courts have the power to scrutinise the fairness of all contractual terms that have not been individually negotiated. National courts must therefore review, by reference to the particular circumstances of the case, whether such terms meet the requirements of good faith, balance and transparency laid down in the UCTD.

Transparency requirements

So far as transparency is concerned, regardless of the exception in Article 4(2), national courts must ensure that contract terms and drafted in plain intelligible language so that an average consumer, who is reasonably well-informed and reasonably observant and circumspect, is in a position to understand the specific functioning of the method used for calculating the variable interest rate and thus evaluate, on the basis of clear, intelligible criteria, the potentially significant economic consequences of such a term on his or her financial obligations. The precontractual information and promotional materials are important in that regard to communicate all the information likely to have a bearing on the extent of the borrower’s commitment, the nature of the services provided and the to enable the consumer to estimate the total cost of the loan.

The ECJ accepted that, by definition, variable rates mean that it is not always possible to set out the amount of the loan repayments for the entire term of the agreement. It would be sufficient to refer the borrower to a published index (such as the IRPH) that was easily accessible to the average consumer and to other essential information that was published or required to be circulated to the borrower concerning the calculation or fluctuation of the rate.

Importantly, the ECJ underlined that fairness and transparency are fact specific and national courts will be responsible for deciding the legality of financial contracts terms on a case-by-case basis.

Remedies

The third question raised the issue of remedies if a contract term is found to be unfair and consequently null and void. Article 6 of the UCTD requires the national court to “exclude” or strike out that clause so that it can no longer produce any binding effects against the consumer. The ECJ confirmed that national courts are not allowed to modify or re-write the terms of the contract as that would dissuade lenders from complying with consumer protection law if they could seek their subsequent judicial amendment.

Crucially, the Grand Chamber recognised that the removal of certain terms could lead to the annulment of the loan agreement in its entirety which could put the consumer in a worse position than the situation with the unfair clause in place. For instance, the invalidity of the mortgage might mean that the entire loan became immediately repayable in full, forcing the borrower to sell his home. In such circumstances, where the invalidity of the term created unfavourable circumstance to the detriment of the borrower, the national court is permitted to substitute the unfair term (here a variable interest rate) with a statutory index provided by national law.

The outcome is likely to cause a number of lending institutions to review and re-think the drafting of any credit agreements and the clarity of any precontractual and promotional materials falling within the scope of the UCTD.

Read full judgment here.

Anneli Howard acted for the United Kingdom Government whose observations on remedies were upheld by the ECJ.

HMRC secures Excise Directive victory in the Court of Appeal – Brendan McGurk acts for HMRC

The Court of Appeal has today handed down a judgment that considers the relationship between Articles 33 and 37 of Directive 2008/118/EC – the Excise Directive. The Appellant had contended that excisable goods would cease to be so having been destroyed following seizure and forfeiture by UK Customs authorities. Specifically, it argued that the destruction of goods at the hands of authorities following seizure engaged Article 37 which materially provides that: “in the event of the total destruction or irretrievable loss of the excise goods during their transport in a Member State other than the Member State in which they were released for consumption, as a result of the actual nature of the goods, or unforeseeable circumstances, or force majeure, or as a consequence of authorisation by the competent authorities of that Member State, the excise duty shall not be chargeable in that Member State.” The destruction of those goods by customs authorities would, it was contended, retrospectively preclude any duty point arising under Article 33 of the Directive, a precondition for the levying of duty. The Court of Appeal has comprehensively rejected that contention finding that the purpose of the proviso in Article 37 was to authorise the destruction of goods which are no longer saleable and on which it would not be appropriate to levy excise duty. The Appellant’s argument would, in effect, have incentivised smuggling since there would be relatively little downside to seizure where the party in question would not be liable for duty or any penalty absent a duty point having been reached. The Court of Appeal’s ruling confirms that that is not the law.

Brendan McGurk acted for HMRC and the judgment is here.

Daniel Beard QC and Jack Williams appear for Intel in General Court

Daniel Beard QC and Jack Williams were in the General Court of the European Union on 10 to 12 March representing Intel in an appeal against a decision of the European Commission. The case (T-286/09 RENV) is a remittal back to General Court following Intel’s successful appeal to the Grand Chamber of the Court of Justice of the European (C-413/14 P), which set aside an earlier General Court judgment and clarified the legal framework to be applied in Article 102 TFEU cases. The case is a highly important one with significant ramifications for the proper approach to the assessment of alleged abuses of dominance under both European and domestic competition law rules.

Court of Appeal judgment in CMA v Flynn / Pfizer

The Court of Appeal handed down a Judgment today on the appeals against the Competition Appeal Tribunal’s judgment which set aside parts of the CMA’s decision finding that the pharmaceutical companies, Pfizer and Flynn, had breached Article 102 TFEU / the Chapter II prohibition by charging unfairly high prices for the anti-epileptic drug, phenytoin sodium capsules.

The Court of Appeal re-affirmed the Tribunal’s decision that the question of abuse and penalties be remitted to the CMA. The Court dismissed the CMA’s argument that it was unnecessary to examine evidence of comparator products put forward by the undertakings under investigation. The CMA must evaluate that evidence fairly and impartially. However, the Court considered that the CAT was wrong to hold that the CMA had to carry out a ‘full investigation’ of the comparators in all cases.

The Court upheld the CMA’s ground of appeal that the Tribunal had erred by requiring the CMA to identify a hypothetical benchmark price in assessing whether prices were excessive. The Court also departed in a number of respects from the Tribunal’s reasoning regarding the principles to be applied in unfair pricing cases.

The Court of Appeal’s judgment provides a detailed consideration of the test to be applied in unfair pricing cases and of the nature of the duty upon a competition authority to evaluate evidence adduced by an undertaking in its defence.

Mark Brealey QC acted for Pfizer.

James Bourke acted for the European Commission.

Click here for the full judgment.

Cross-border group loss relief: CJEU refuses to extend Marks and Spencer principle

In case C-405/18 Aures Holdings, the CJEU refused to extend the (limited) entitlement to cross-border group loss relief provided for in case C-446/03 Marks & Spencer to a further category of taxpayer. The applicant had sought to deduct historic losses against tax liabilities for the current year in one Member State, even though those losses had occurred in another Member State and in a different accounting period when the parent company had not even been tax resident in its current Member State.

Brendan McGurk successfully intervened on behalf of the United Kingdom Government.

The judgment is here and a detailed case note is here.

Upper Tribunal asks the Court of Justice of the EU whether EU regulation on the origin of solar panels is valid

In a judgment issued today in the case of Renesola v HMRC, the Upper Tribunal (Mr Justice Marcus Smith and Judge Richards) has asked the Court of Justice of the EU for a preliminary ruling on the validity of a Commission Regulation fixing the country of origin of solar modules (commonly known as solar panels). The Commission Regulation lays down that, for EU customs purposes, solar modules are to be taken to have their origin in the country where the solar cells are manufactured.

The case was brought by an importer into the UK of solar modules made in India. The cells used in the modules came from China. HMRC applied the Regulation and treated the modules as having Chinese origin – which meant that they were liable to pay high anti-dumping and countervailing duties imposed by EU trade defence measures on solar modules with Chinese origin. The importer argued that it wasn’t liable to those duties because the Commission had exceeded its powers in making the Regulation, because the manufacturing of the modules in India from the cells and other items was the last substantial manufacturing process (the relevant test of origin in EU and WTO law).

Although the First-tier Tribunal has refused to make a reference, the Upper Tribunal accepted that the FTT had gone wrong in failing to take any proper account of the evidence that cells were useless as generators of electricity outside modules because they were not durable in outside conditions. The UT accepted that the substantial change in durability as between cells and modules, among other factors, could well mean that the manufacture of modules had to be regarded as a substantial step in manufacture, and thus as the last substantial step. If that was right, then the Commission could have exceeded its powers by making a Regulation fixing origin at the cell stage. Since only the CJEU could find a Commission Regulation to be invalid, a reference should be made.

The outcome of the reference will be relevant to the UK even after the end of transition, since the relevant EU rules are based on WTO principles, which the UK will have to apply even after Brexit.

It should be noted that during the transitional period (until at least 31 December 2020) the UK courts remain, under the Withdrawal Agreement and the EU Withdrawal Agreement Act 2020, able to – and in some cases bound to – make preliminary references to the CJEU. The CJEU can decide those references even after the end of the transition period, and the CJEU’s answer will bind the UK courts.

George Peretz QC represented the importer, Renesola.

Court of Appeal rejects Heathrow third runway competition law appeal

R (Heathrow Hub Ltd) v Secretary of State for Transport [2020] EWCA Civ 213

The Court of Appeal has today handed down judgment in the two appeals challenging the Government’s decision to adopt a National Planning Statement in favour of a third runway at Heathrow. Besides the well publicised success of the climate change challenge brought by Plan B Earth and Friends of the Earth, the Court also gave judgment in the separate competition law based judicial review brought by Heathrow Hub Ltd (“Hub”).

This judgment is significant not only for its analysis of the principles to be applied under articles 106(1) and 102 of the Treaty on the Functioning of the European Union (“TFEU”) regarding abuse of a dominant position, but also for its discussion of the principles governing the application of Article IX of the Bill of Rights, concerning the circumstances in which statements made in Parliament can be used in court challenges.

Hub had promoted an alternative scheme to that promoted by Heathrow Airport Ltd (“HAL”) and adopted by the Government. Their scheme was for an Extended Northern Runway (“ENR”), extending the current northern runway so that it could effectively operate as two separate runways, with aeroplanes landing on one and taking off from the other. Hub owned the intellectual property rights to this scheme.

Hub alleged that the Secretary of State had breached EU law by insisting (prior to the decision on which scheme to prefer) that HAL must provide a guarantee or assurance that it would implement the Claimants’ scheme if that scheme were selected by the Government as its preferred scheme for airport expansion, and making the provision of that guarantee or assurance an effective pre-condition to the selection of the ENR Scheme. The alleged pre-condition was said to be unlawful as a matter of EU law insofar as it breached articles 106(1) and 102 TFEU, as it facilitated an abuse or potential abuse of dominance by HAL. Hub also argued that the decision had been made in breach of their legitimate expectation that no such assurance would be taken into account, and that it should be quashed on the grounds that the reasons provided for the decision were inadequate.

The Court of Appeal (Lindblom LJ, Singh LJ and Haddon-Cave LJ) dismissed Hub’s appeal from the Divisional Court in its entirety. The Court found that Hub had enjoyed no legitimate expectation of the kind asserted. In respect of both the legitimate expectation claim and the competition law complaint, the Court found that the matters complained of had played no material part in the decision to prefer the north-west runway scheme over the Claimants’ scheme. In so doing, it rejected Hub’s case that statements made in Parliament by the then Secretary of State for Transport, Chris Grayling MP, showed that the most important reason for the rejection of the ENR scheme was the lack of a guarantee or assurance, dismissing Hub’s argument that to do so was in breach of Article IX of the Bill of Rights.

The Court of Appeal criticised the Divisional Court’s willingness to entertain the competition law complaint notwithstanding its immateriality. Nonetheless, it went on exceptionally to consider the complaint, and to overturn the Divisional Court’s conclusions insofar as they had been adverse to the Secretary of State and to HAL.

  • First, the Court held that Hub had not established that it was competing in a market for the provision of airport operation services, commenting that “Competition law is not concerned with regulating a contest between rival schemes to be chosen under a national planning policy.”
  • Secondly, the Court rejected the Divisional Court’s conclusion that HAL had “special or exclusive rights” within the meaning of Article 106 TFEU by virtue of its predecessor BAA’s former status as a state monopoly and/or the operation of the CAA licensing regime.
  • Thirdly, the Court held that Hub had failed to demonstrate that HAL was dominant in a relevant economic market in which it was competing, in the absence of any expert economic evidence to that effect.
  • Fourthly, the Court rejected Hub’s argument that the mere existence of a conflict of interest (such as a request to HAL that it guarantee Hub’s scheme before it could be selected) was sufficient to found a breach of Article 106 and 102 TFEU, absent any liability to distort competition.

The Court refused Hub permission to appeal.

The judgment is here.

Robert Palmer QC and Alan Bates acted for the Secretary of State for Transport. Gerry Facenna QC acted for Heathrow Airport Limited.