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Court of Appeal in Iceland reverses judgment in beer dispute

Beer dispute in Iceland

12.02.2024 - The Icelandic Court of Appeal has reversed a previous ruling in a beer dispute, exonerating the State Alcohol and Tobacco Company (ÁTVR) from a claim made by an alcohol importer. The wholesaler Dista ehf. filed a lawsuit against ÁTVR in June 2021, demanding the annulment of two decisions by ÁTVR to remove two types of beer from their product range and to cease purchasing them due to not meeting a certain profitability criterion.

Dista argued that it was unlawful for ÁTVR to base its decisions on profitability, as this criterion is not supported by the laws on alcohol and tobacco trade. Instead, decisions should be based on consumer demand, as referred to in the legislation, determined by the sales volume of the relevant product.

In June 2022, the District Court of Reykjavik invalidated ÁTVR's decisions on the grounds that they violated the Constitution's Article 75(1) and the principle of legality in Icelandic law.

However, the Court of Appeal, delivering its verdict last Friday (February 9), disagreed. It outlined that according to the legislation, the minister is to set detailed rules on product selection, purchasing, and distribution by ÁTVR, aiming to ensure a variety of products considering consumer demand while also allowing alcohol producers and suppliers the opportunity to sell their products in alcohol retail stores.

The Court found that the legislation's amendment history did not indicate an intention by the legislator to alter the long-standing arrangement of basing product selection criteria on profitability. It agreed with ÁTVR that profitability criteria reflect demand and are more suited to ensuring a variety of products in ÁTVR stores and sales opportunities for suppliers. The Court deemed the profitability criteria to be substantive and in line with the objectives of alcohol laws, which direct ÁTVR to operate with social responsibility and public health as guiding principles.

Therefore, the Court concluded that the profitability criteria had sufficient legal support. It also rejected Dista's claim that ÁTVR violated the administrative law's objection rule, noting Dista was aware of the criteria governing ÁTVR's product selection and had expressed its position on them. Consequently, there was no need to offer Dista an opportunity to comment on the matter.

Finally, the Court dismissed Dista's arguments regarding the lack of authority of the ÁTVR employee who made the disputed decisions and other alleged breaches of administrative law principles.

As a result, ÁTVR was acquitted of Dista's claims, and Dista was ordered to pay ÁTVR 1.5 million ISK in legal costs for both the district court and the Court of Appeal proceedings.

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