European Union: Commission Proposal to Amend EU Legislation on Spirit Drinks

A proposal¹ for a new EU regulation on the definition, description, presentation and labelling of spirit drinks is currently being discussed by the EU Institutions. The intention is to improve the applicability, readability and clarity of current EU legislation on spirit drinks. In particular, the new Regulation once adopted will combine, update and replace the provisions of the existing rules governing these products.²

Despite its technical nature, the proposal implies many political choices and is likely to prove extremely controversial during its adoption by the European Institutions. The recurrent concern of authorities for reducing the misuse and abuse of alcohol is not, however, addressed in the current proposal.

One of the aims of the proposed Regulation is to introduce a well-defined policy for spirit drinks based on a new categorisation of spirit drinks into three product categories. The three categories are:

The Commission asserts that the new proposal will aid clarity and consumer information. However, the proposed categorisation has been heavily criticised by the EU spirits industry. In particular, some European producers consider that the current system is clearer for the consumer.

The European Parliament is ("EP") Agriculture Committee, in its draft report on the proposals, favours the labelling of all spirits with a list of ingredients in accordance with the provisions of the EU's general Food Labelling Directive (2000/13).

Detailed technical specifications and definitions, are set out in the Annexes to the Regulation. These include, in Annex I, general definitions such as "sweetening", "mixing", "ethyl alcohol of agricultural origin", "blending" and "maturation or ageing".

In addition, Annex II sets out definitions and technical specifications for individual spirits, specific spirit drinks and other spirit drinks. These include, for example, a definition of each type of product, production methods, minimum and/or maximum alcoholic strength, reference to permitted (or banned) substances that may (or may not) be added and other provisions specific to the category or product, such as the use of certain prescribed terms (for example, "grain brandy" or "traditional").

The possibility for producers to use, in certain cases, flavouring substances and sweeteners under the proposed Regulation has also proved controversial. In particular, it highlights the recurrent dilemma and conflict of approach within the industry between those advocating the promotion of the added-value of traditional production methods and those wishing to encourage and benefit from the growth of industrial processes. This dilemma also lay at the heart of the 20-year delay in the negotiation of the EU-US trade agreement on wine.³

The same dilemma is faced by this proposal; some parts of the EU industry do not appear to favour the provisions that will allow spirit drinks to be flavoured or sweetened with artificial substances. Currently, only natural aromatic substances and preparations may be used as flavourings in spirit drinks.⁴

The draft Regulation also sets out detailed requirements for the description, presentation and labelling of spirit drinks. These include, in particular, specific rules concerning the use of sales denominations⁵ for the various categories of products. In all cases, the sales denomination must be shown clearly and visibly in a prominent position on the label.

Among others, the draft Regulation states that alcoholic liquids may not be described, presented or labelled by associating words or phrases such as "like", "type", "style", "flavour" or similar indications with any of the sales denominations and/or geographical indications set out in the Regulation. Similarly, no trade mark, brand name or fancy name may be substituted for the sales denomination of a spirit drink.

The proposal provides for the continued protection of geographic indications ("GI") currently protected under Regulation 1576/89⁶, such as Scotch Whisky, Irish Whiskey, Cognac, Svensk Vodka and Brandy de Jerez. Annex III of the draft Regulation lists those GI currently recognised and protected.

For the purposes of the Regulation a GI is an indication which identifies a spirit drink as originating in the territory of a country, or a region or locality in that territory, where a given quality, reputation or other characteristics of that spirit drink are essentially attributable to its geographical origin.

A registration procedure is set out in Article 15 of the draft Regulation for further GI to be registered in Annex III and hence protected in future. Names that have become generic may not be registered. The provisions on GI are likely to be emotive and the EP Agriculture Committee has been quick to focus on this issue. There are also concerns that attempts by the Committee to seek to define more narrowly certain product definitions, notably vodka by restricting its composition to grain or potatoes, could lead to the exclusion of products previously produced and marketed in certain regions of the EU – notably in the new Member States from central and eastern Europe.

Equally, international competitors are likely to react to any moves to narrow current definitions that could be perceived to be motivated by protectionism. Recital 8 of the proposal indicates that "in the interests of consumers" the Regulation should apply to all spirit drinks sold on the EU market, whether they are produced in the Community or in third countries.

While Recital 10 also acknowledges the need to have regard to the provisions of the Agreement on Trade-related Aspects of Intellectual Property Rights (the so-called "TRIPS" Agreement) under the World Trade Organisation ("WTO"), there is no mention of this further in the operative part of the text. WTO members are likely to scrutinise the proposals carefully. The EU recently amended its general provisions on protected designations of origin and protected geographic indications following a WTO dispute panel ruling following complaints brought by Australia and the United States.⁷

Somewhat surprisingly, in view of the stated internal market basis for the legislation, Article 5 of the Commission's proposal permits Member States to lay down stricter or additional rules to those laid down in Annex II on the production, description, labelling, packaging and presentation of spirit drinks which are produced on their own territory.

This goes beyond the current rules that allow Member States to lay down stricter or additional rules only for spirits holding a GI.

Provision is made for the amendment of the Annexes, the adoption of detailed implementing rules and for transitional measures to be adopted by the Commission.

This new Regulation is subject to the Co-decision legislative procedure, involving the European Parliament and the Council of Ministers (that is, Member States' Ministers) as co-legislators. The European Parliament could complete its first reading at the end of the year on the basis of the recommendation of its Agriculture Committee.

However, given the controversial and sensitive nature of the proposals, the Regulation will likely require two readings, meaning that adoption is very unlikely until earliest spring or early summer 2007.